Young Guns
I have heard many theories on this topic over the years, and most people seem to think that young bucks on Wall Street do better when the tape is ripping.
Sometimes the less you know, the better off you are.
Albert Einstein thought that a person who hadn’t made a great contribution to science before hitting 30 was unlikely to do so. The same harsh law seems to apply to trading floors: one London-based hedge fund that monitors these things closely says the most successful ideas consistently come from traders in their late twenties. Was Société Générale’s real problem not that Jérôme Kerviel was accumulating rotten positions, but that at 31, he was over the hill?
Traders below 30 are old enough to have some experience, but young enough for fresh ideas - and the arrogance to pursue them. Mostly unmarried, and without dependants, they are more concerned with making capital than preserving it. Bets will, of course, go awry: Nick Leeson was 28 when he kneecapped Barings. But hunger and intensity is more often than not rewarded. Data from Hedge Fund Research show that newer funds - generally stuffed with young traders and managers - tend to outperform funds in their later years, with the greatest out-performance in the first 12 months.
The cult of youth should not be overstated. Anecdotal evidence suggests that after the technology bubble burst, for example, many youngsters were so scarred by losses that they entered the 2003 bull market in much too cowed a frame of mind. The best asset management firms, meanwhile, offer a blend of exuberance and experience. FT
Hopefully this study took survivorship bias into account, and all those dinosaurs still punching the clock should be congratulated. They might not outperform the 30-year olds, but they are doing something right if they survived this long.
Trading and Youth
Financial Times
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