The same hormone that induces animals to fight and pumps athletes up for games also prepares traders to take on risk.
Yes, it’s testosterone, and it does so by making traders more confident and drastically increasing their appetite for risk.
This new insight comes from Cambridge University’s research fellow, John Coats, who has been researching hormone levels in traders.
“In one experiment we sampled hormones from 17 male traders and found that their testosterone did indeed rise with above-average profits, and in other studies, with 54 traders, we found that higher testosterone led to greater risk-taking,” wrote Coates in the New York Times.
A scientist is telling us that men have more trouble keeping their heads than women? Go on.
“Women and have a fraction of the testosterone of young men, so if more of them managed money, we could perhaps stabilize the markets,” he adds.
This research suggests that women would make excellent brakes for a corporate machine spinning out of control.
“Under circumstances of outrageous success or terrifying failure, our biology can overreact; and when this happens to traders and investors, they suffer an irrational exuberance or pessimism that can destabilize financial markets and wreak havoc on the wider economy,” wrote Coates.