The world of financial trading has long been joked about as a boys' club full of brokers jacked up on testosterone. A British study now lends weight to the theory.
University of Cambridge researchers John Coates and Joe Herbert found that high testosterone levels in the morning in male financial traders seemed to translate into a bigger-than-normal profit that day.
Their study is published Monday in the Proceedings of the National Academy of Sciences journal.
Testosterone and the stress hormone cortisol are naturally produced steroids that affect mood and decision-making. The first can produce confidence and a willingness to take risks while the second rises with uncertainty and skews the brain toward caution.
An increased amount of testosterone with a low occurrence of cortisol on a given day can make a trader more aggressive and thus more profitable, the researchers argued.
"Our results suggest that higher testosterone may contribute to economic return, whereas cortisol is increased by risk," they wrote.
The researchers tracked 17 male traders in London over eight business days and analyzed their saliva before and after the day's trading activity. They compared the traders' testosterone and cortisol levels against their financial performances.
Thirteen traded mainly European fixed-income futures while the other four dealt mainly with German stock index futures or the European Equity Index. Traders ranged in age from 18 to 38, and annual income ranged from about $24,000 US to more than $10 million US. Single trades ranged from about $200,000 US to $1 billion US.
The researchers found those traders who showed high testosterone at the end of the day usually had been successful, but those with high levels in the morning usually ended up with greater-than-usual profit.
Cortisol wasn't linked directly to big losses, however, but rather to the variance of the markets.
The researchers suggested that the cyclical bubbles and crashes of financial markets may be linked to hormones, since these natural steroids influence decision-making.
Routinely high levels of either steroid can also be bad for the body, the researchers said.
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