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decisions

Hormonal traders make risky decisions

It’s no secret that stockbrokers operate in stressful environments, so what happens when these environments affect their hormone levels? A new study has found that the state of a trader’s body chemistry can impact the stock market just as much as the state of the economy.

T

he study, led by researchers from

assets,” the study authors revealed in the journal

the University of Alicante, Imperial College

Scientific Reports. “Cortisol appears to affect

of London and the University of Cambridge,

risk preferences directly, whereas testosterone

responded to research suggesting the endogenous

operates by inducing increased optimism about

hormones cortisol and testosterone may critically

future price changes.”

influence a trader’s financial decision-making.

The researchers believe the stressful

Cortisol is elevated in response to physical or

environment of financial markets may promote

psychological stress, preparing the body for a

high levels of cortisol and testosterone in traders.

fight-or-flight response, while testosterone rises

Co-author Dr Ed Roberts, from Imperial College

before competitive situations.

London, said, “It would be interesting to measure

The scientists simulated the trading floor by

traders’ hormone levels in the real world, and

having 142 volunteers, male and female, play an

also to see what the longer term effects might be.”

asset-trading game in groups of around 10. Those

Co-author Dr Carlos Cueva, from the

who had naturally higher levels of cortisol were

University of Alicante, said that “hormonal

more likely to take risks, and high levels in the

changes can help us understand traders’

group were associated with instability in prices. In

behaviour, particularly during periods of

a follow-up experiment, 75 young men were given

financial instability”. Dr Roberts added that

either cortisol, testosterone or a placebo before

by understanding what these hormones do,

playing the game.

researchers can “look at the environment in

“We found that both cortisol and testosterone shifted investment towards riskier

4 | LAB+LIFE SCIENTIST - September 2015

which traders work and think about whether it’s too stressful or too competitive”.

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Lab+Life Scientist Sep 2015  

Lab+Life Scientist provides researchers, lab managers, department heads, scientists, academics, investors, and other science industry profes...

Lab+Life Scientist Sep 2015  

Lab+Life Scientist provides researchers, lab managers, department heads, scientists, academics, investors, and other science industry profes...