Researchers from Imperial College London suggest that testosterone and cortisol influence stock market results. High rates would increase the risk taking of traders.
Are stock market crashes linked to traders’ hormones? This is in any case what suggests a study British published this Thursday in the review Scientific Reports. Conducted by researchers at Imperial College London, this work indicates that testosterone and cortisol could be explanations for financial market volatility.
“We believe that hormonal fluctuations can help us better understand the decisions of traders, especially during times of financial instability,” says Dr Carlos Cueva, a lead author in the economics department at the University of Alicante. .
142 volunteer traders
For their work, the researchers simulated a stock market floor in a laboratory. An original protocol to which 142 men and women have lent themselves. During a first experiment, the volunteers, divided into groups of 10, simulated a working day. According to the analysis of saliva samples, those with the highest cortisol levels were more likely to take risks. These high rates were associated with price instability.
Then, in a second experiment, the researchers gave 75 men testosterone, cortisol or a placebo. Both hormones increased the appetite for risk among traders. Cortisol, however, appears to play a direct role in risk taking, while testosterone appears to increase traders’ optimism about price developments.
Reproduce in real conditions
“We only looked at the almost immediate effect of these hormones in the laboratory. It would be very interesting to measure the hormonal level of traders in real life, but also to see how long the effects last, ”comments Dr Ed Roberts, one of the lead authors, from the Department of Medicine at Imperial College London.
Researchers from the University of Cambridge have looked into the subject in particular. Their study published in April 2008 in the scientific journal PNAS showed at the time that the days when traders made the most profits were those when their testosterone levels were highest.
.
