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The Affect of Hormones on Financial Markets

New research shows that the hormones testosterone and cortisol may destabilize financial markets by making traders take more risks.

For their study, researchers simulated the trading floor in the lab by having volunteers buy and sell assets among themselves. They measured the volunteers’ natural hormone levels in one experiment and artificially raised them in another.

When given doses of either hormone, the volunteers invested more in risky assets, according to the study’s findings.

According to the researchers, the stressful and competitive environment of financial markets may promote high levels of cortisol and testosterone in traders.

Cortisol is elevated in response to physical or psychological stress, increasing blood sugar and preparing the body for a fight-or-flight response.

Previous studies have shown that men with higher testosterone levels are more likely to be confident and successful in competitive situations.

The researchers of the new study, published in Scientific Reports, suggest their findings should be considered by policymakers looking to develop more stable financial institutions.

“Our view is that hormonal changes can help us understand traders’ behavior, particularly during periods of financial instability,” said Dr. Carlos Cueva from the Department of Economics at the University of Alicante and one of the lead authors of the study.

“Our aim is to understand more about what these hormones do,” added Dr. Ed Roberts of the Department of Medicine at Imperial College London and another of the lead authors of the study.

“Then we can look at the environment in which traders work, and think about whether it’s too stressful or too competitive. These factors could be affecting traders’ hormones and having an impact on their decision-making.”

For their study, the researchers first measured the levels of the two hormones in saliva samples of 142 volunteers, male and female, playing an asset trading game in a group of about 10 people. They found that the volunteers who had higher levels of cortisol were more likely to take risks, and high levels in the group were associated with instability in prices.

In a follow-up experiment, 75 young men were given either cortisol or testosterone before playing the game, once with the hormone and once on a placebo. The study found that both hormones shifted investment towards riskier assets.

Cortisol appeared to directly affect volunteers’ preference for riskier assets, while testosterone seemed to increase optimism about how prices would change in the future, the researchers explained.

“The results suggest that cortisol and testosterone promote risky investment behavior in the short run,” said Roberts. “We only looked at the acute effects of the hormones in the lab. It would be interesting to measure traders’ hormone levels in the real world, and also to see what the longer term effects might be.”

Source: Imperial College London 

The Affect of Hormones on Financial Markets

Janice Wood

Janice Wood is a long-time writer and editor who began working at a daily newspaper before graduating from college. She has worked at a variety of newspapers, magazines and websites, covering everything from aviation to finance to healthcare.

APA Reference
Wood, J. (2018). The Affect of Hormones on Financial Markets. Psych Central. Retrieved on September 27, 2020, from
Scientifically Reviewed
Last updated: 8 Aug 2018 (Originally: 4 Jul 2015)
Last reviewed: By a member of our scientific advisory board on 8 Aug 2018
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