Study: Ethnic Diversity Helps Thwart Market Bubbles, Lift Profits

Daniel Bases, Reuters, November 17, 2014

Enhancing ethnic diversity on the world’s financial trading floors is a recipe for deflating devastating bubbles and increasing profits, data from a new study showed on Monday.

“Ethnic diversity is a value in itself. What we show is that it can economically also be valuable in market efficiency terms,” said David Stark, professor of sociology and international affairs at Columbia University.

Across markets and locations, pricing accuracy is 58 percent higher in diverse markets, as is the ability to thwart pricing bubbles, the study published by the Proceedings of the National Academy of Sciences found.

“Traders in ethnically homogenous markets are significantly less accurate, and thus more likely to cause price bubbles,” the paper said. Results showed their performance worsened over time.

“Diversity facilitates friction. In markets, this friction can disrupt conformity, interrupt taken-for-granted routines, and prevent herding,” the paper said.

The study was conducted among people from East Asia and the Southwest United States. It measured a baseline of financial literacy among the participants. They were placed in a simulated trading environment, and set the task of trying to earn money while the researchers measured their pricing accuracy via a commonly used real-life trading terminal. {snip}

“They could look around them and see who was in the room but they didn’t talk to each other,” said the lead author of the report, Sheen Levine, principal investigator at Columbia’s Institute for Social and Economic Research and Policy.

“There is an established finding across the social sciences, that we tend to trust the actions and beliefs of people that look like us,” said Levine. “All the assumptions they are making are a very superficial impression of what the other guy looks like. They don’t know if he’s reasonable.”

{snip}

“Ethnic diversity was valuable not necessarily because minority traders contributed unique information or skills, but their mere presence changed the tenor of decision making among all traders. Diversity benefited the market,” the study said.

{snip}

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  • This sounds like a study that started with a conclusion then concluded with the reasoning. You know, the good ole fashioned throw the dart against the wall then paint the dartboard around wherever it lands routine.

    But even if this is true — So what? I’d rather have an ethnostate than a sky high stock market. If the health of the great flea market known as the market for long ago issued shares of common stock of larger publicly traded corporations means that I have to live in an international airport, the forget about it.

    • Oil Can Harry

      So why hasn’t Tribesman “Sheen Levine” demanded that Israel open its borders to mass Third World immigration?

      According to his bogus study, Diversity will boost Israel’s economy. So why are they deporting black geniuses from Eritrea and Ethiopia?

      • Bossman

        Every Jew is welcomed in Israel. Even the so-called black Jews of Ethiopia are tolerated.

        • The fence along the Sinai was built to keep out Somali Muslims, who for some curious reason did not like Egypt very much.

        • OS-Q

          The Israeli government welcomes Ethiopians, but the Israelis themselves certainly don’t.

          • Ike Eichenberg

            Welcome might not be the word, begrudgingly live up to the right of return by acknowledging those Ethiopians had been practicing Judaism for a long time might be a better way to put the government response.

            forbes DOT com/sites/eliseknutsen/2013/01/28/israel-foribly-injected-african-immigrant-women-with-birth-control/

          • M&S

            Google Benjamin Netanyahu and ‘Israel is for whites’. His foreign minister too.
            Look up Israeli’s demanding (and getting, instantly) the right to put their kids into White’s Only schools to avoid the diversity.
            Israel is getting set to repatriate all it’s brother Jews back to somewhere on or near the horn of Africa on a one-time fire $ale basis which American will undoubtedly help pay for because, golly we’re stupid.

          • B.A_2014

            Why would he say that?

            It’s a strange one. Does he and his fellow Israelis identify as white?

          • bilderbuster

            As Julia Grant (wife of US Grant) quipped about why she hadn’t freed their slaves “Good help is so hard to find.”

      • archer

        Because he’s another goober, I mean Gruber that thinks all goys are complete fools.

    • M&S

      The ‘trading floors’ of even the biggest of the markets at the NYSE are largely tourist fictions anymore. Majority trading is electronic and instead of scoping your competitors faces and betting on their tells and sells ‘by the points’, you look at telecoms maps and see who has the shortest electronic route to the server to get your orders placed first.
      Now if you want a REAL education in the value of shared ethnic outlook as insider trading leverage, look back at the years from 1893 to 1929 and specifically at the ‘ethnicity’ of the powers behind the big bankers who forced the markets to all time liquidity and margin busts in those years, buying on the low instigated by the artificial high.
      We are not talking about Asians here. We are not talking about whites.
      The writer is a moron. The stock market is the lottery rich people play when they are too embarrassed to go to the 7-11 for a Quick Pick.
      Forgive me if I long for the day when ‘Mercantile’ meant race protection behind a wall of nationalism that knew what blood and soil meant.

      • Jesse_from_Sweden

        Actually, the stock markets tend to always go up in the long term, and investments pay off provided you spread them out and minimize the risks.

        In order to make money, you must invest money. And in order to make an idea turn a profit, you need money from somewhere.

        Stock markets are the epitome of capitalism and western society.
        The small “bumps” and financial havocs can be compared to wars in the western world.
        They happen at times, but they are not the norm but an abberation, even if that doesn’t make them any less devastating when they do happen.
        But the world tends to bounce back sursprisingly quickly from them, as long as you look at things in a wider perspective.

    • Jesse_from_Sweden

      I can believe this one.

      Since trading and investing is about putting money into various things and bubbles are when too many put too much money into something that overinflates it’s value.

      So having diverse people, meaning people who don’t think the same and don’t trust others, means that they will not put money into things just because others do. And they won’t reason the same way meaning they will put money into things that others don’t and won’t “overvalue” the same things.

      In other words, there is a a bigger spread on the investments, which means less chance of bubbles and less chance that an opportunity will be overlooked.

      Although all this is based on the fact that the stock market is always going up in a longer perspective, so money invested will return a profit overall as long as it’s spread out, avoiding bubbles.

      Of course, there is no actual need for diversity in a society in order to have diversity in the stock market in todays globalized economy and with internet providing easy access to any stock market in the world from anywhere in the world.
      You can just as easily invest in the chinese market from USA or Europe as from China itself.

  • Mary

    As long as the markets are benefitted, what’s a little friction? A little lack of national cohesion? A little societal turmoil? We all know what’s really important here–the markets.
    This is precisely why the elites are every bit as pro-immigration and anti-White as the most rabid left-winger. On this issue, which is the most important to the fate of our nation, these people are all in lockstep.

  • LHathaway

    So, we’re all equally viable and interchangeable economic units. Unless you’re white, then you’re less valuable. If you’re a woman or a person of color, you’re more valuable. It’s all part of making up for treating people unequally. Supposedly we’ve been treating WOMEN and PEOPLE OF COLOR unequally, up to whatever time it is right now. The legacy of past mistreatment doesn’t include considering whites or men as people. Perhaps at some future time they will be treated so. They’ll let us know.

  • Magician

    “Ethnic diversity was valuable not necessarily because minority traders contributed unique information or skills, but their mere presence changed the tenor of decision making among all traders. Diversity benefited the market,”

    BUT most successful high tech companies have mostly Asian or white male workers

    • LHathaway

      Yes, at the high end of the tech industry, as AmRen readers have been reading recently, whites are still prevalent (or in the tech department of the tech industry whites and asians are prevalent). I’m guessing the rest of us can be more easily replaced. Actually, they’ve found a way to replace whites even in the mind of the tech industry. No matter where they are being replaced, no one complains.

    • Bossman

      Those Asians and white male workers are very nerdy.

      • none of your business

        Obviously you have never known any.

    • Jesse_from_Sweden

      The point was that diversity made them less inclined to think the same and put their money on the same thing.
      And in the stock market, the key to success is to spread the investments.

      But in todays digitalized world, you don’t need diversity in a country to have diversity on the stock market, it’s just as easy to invest in the russian market, chinese market, european market, american market etc, as long as you are on a computer connected to the internet.

  • superlloyd

    Another faux study to push diversity on US capital markets. What utter bilge. Interesting to note the diversity consisted of Whites and East Asians in the simulations. No magic negroes to screw things up for their prior sought conclusions. Even the researchers implicitly recognise that the negro can’t step up to the plate.

    • Pathfinder75

      “No magic negroes to screw things up for their prior sought conclusions.”

      Or Mestizos who would do the same.

    • Charles Martel

      A study on financial markets done by a sociology professor – let alone an Ivy Leage sociology professor! I’m skeptical of his methodology and conclusion.

  • Pathfinder75

    This “study” reads like a piece of propaganda being peddled by the globalists and open borders fanatics who are on the editorial board of the Wall Street Journal.

  • JBP

    So what wasn’t said was this: “ethnic diversity in business relationships increases the level of distrust, consequently increasing the probability that subsequent business transactions are conducted with heightened rigor and accordingly higher success rates. Because people naturally and rightfully don’t trust people out of their tribe.”

    • GeneticsareDestiny

      That is essentially the key finding of this study, but the study’s authors don’t want to admit it. People get much more nervous around people who are visibly unlike them and they will invest more conservatively as a result, which means fewer bubbles will inflate. When faced with ethnic diversity, people have a higher incentive to hold on to whatever wealth they have rather than risk losing it in the stock market.

      This actually may be one of the only real benefits of diversity. But I’d still rather live in an all-white nation with more bubbles than a diverse nation with fewer bubbles.

      The most interesting portion of this study, to me, was this line: “Ethnic diversity was valuable not necessarily because minority traders contributed unique information or skills, but their mere presence changed the tenor of decision making among all traders.”

      Assuming I am understanding this correctly, if we want white traders to be more responsible with their investments, all we have to do is bus in some unemployed blacks to hang out while the trading is happening. They can just sit around and listen to their iPods or something while their presence decreases the incidences of risky trading among the white traders. I wonder if it would be worth it for the government to pay them minimum wage to do this? Would the money saved by having fewer bubbles inflate and then pop outweigh the cost? (I’m sort of joking here, but only partially.)

  • TruthBeTold

    If you ever need to give your blood pressure a workout, I would recommend you tune in Sat. and Sun. morning and watch Melissa Harris-Perry on MSNBC (10-noon est).

    One of her regular guests is a black woman (Farai Chideya) who teaches a coarse on journalism.

    The topic was the lack of diversity in news outlets and the claim that without minorities to tell their story from their perspective, news outlets aren’t getting and giving the full story on any number of issues.

    The black woman (whose name I can’t pronounce) made a remarkable statement.

    She said, ‘it’s a question of ‘can you tolerate internal dissent?’ Because when you bring in different races and classes you will fight in the newsroom’.

    That’s when I started screaming at the TV.

    Imagine going to your job everyday knowing you might get into a fight with someone of a different race. WHY would anyone want that kind of job or put themselves in that position?

    And then after work, you have to go back to your diverse neighborhood and again run the risk of getting into fights with different people of different races.

    If you want to see it, paste this link. She starts her speech at 3:50):

    http:// tinyurl com/psbkk2g

    (Close the space and add the dot before com)

    • Vito Powers

      Do they ever mention the National Association of Black Journalists? As I understand it, this group pushes to keep negative news stories about blacks out of the mainstream media news. That’s why the recent story about the black guy who fathered 26 children with 20 different women isn’t deemed worthy of news coverage.

      • TruthBeTold

        I did notice that the story of the gunman at Florida State U got very little play. I mean, this is red meat to gun grabbers but there’s no national ‘outrage’.

        It all made sense when I learned he was black.

    • none of your business

      “Imagine going to your job everyday knowing you might get into a fight with someone of a different race.”
      Ask anyone who has ever worked with blacks. Ask the teachers Bon and Nancy. If you work with blacks you know that there will be constant fighting, intrigue and conspiracy. Working with blacks in like the true history TV series “The Tudors” One never knows who is plotting against one and where the next blow will strike.

      • TruthBeTold

        I’m well aware what it’s like working with blacks. I said it many times, when I’m around them I don’t initiate a conversation. If spoken to I respond politely.

        But really, who in their right mind wants to go to a job knowing you might get into an argument?

        These people are nuts.

  • Petronius

    But wasn’t the subprime mortgage real estate bubble (from the effects of which we still have not recovered) all about ethnic diversity?

  • Dave West

    I looked at the study, it said that in the two geographical areas, they had two groups, one homogenous and one with at least ONE ethnic minority. Considering that the “traders” weren’t actually speaking to each other about their valuations, it seems to me that the only thing they found was a coincidence.

    Until the sanctions, Russia’s economy had been roaring since about 1998 and was showing few signs of significantly slowing; I’m willing to bet that nearly 100% of people on the trading floors in Moscow were ethnic Russians. Not to mention in the United States trading floors and investment banks are far from homogenous; plenty of East Asians, Middle Easterners, and Indians to go around.

  • Dave West

    I wonder how many non-jews there are at the highly profitable Diamond Exchange in Tel Aviv.

    • none of your business

      Or Amsterdam or 47 st and midtown New York City.

    • Ike Eichenberg

      Do janitors count?

  • none of your business

    I tend to go by the last name in deciding who to trust.

    • bilderbuster

      The Tribals change their names for just that reason. Also first names sometimes tell you more than last names: Shaquille O’Neil.

  • As an economics professor for 30 years, I say this study reeks of a hidden agenda.

    It is standard teaching in economics that market efficiency is enhanced by the free flow of information. This study says the opposite.

    This is one of those experimental studies in which paid participants are put into an artificial situation, not a study of real world traders.

    Diversity creates distrust. Thus diversity is good. Huh? Not in the real world. Diversity does create distrust, but that’s never good.

    • Ike Eichenberg

      The study does have all the hallmarks of a conclusion in search of support.

  • GeneticsareDestiny

    It’s kind of hilarious how hard researchers try to twist these types of findings into being pro-diversity, even though all of the evidence clearly shows us that no one likes diversity (including non-whites).

  • Massif1

    Probably the reason most African nations are 3rd world they lack diversity.

  • Oil Can Harry

    It’s not hard to immigrate to Israel IF YOU’RE JEWISH. I have no problem with that, but that’s different than the p.c. open borders lunacy being pushed throughout the West.