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Broker's testosterone and cortisol may destabilise financial markets

The study, led by researchers from the University of Alicante, Imperial College of London and University of Cambridge, has been published in Scientific Reports by Nature Publishing Group


Estudio_CarlosCuevaAlicante, 3 July 2015

Testosterone and cortisol could destabilise financial markets, according to a recent study led by researchers at the University of Alicante, Imperial College of London and University of Cambridge.

The researchers simulated a financial market in which participants buy and sell financial assets. In one experiment, endogenous levels of testosterone and cortisol were measured in the participants, and in another experiment, they were artificially inflated. Upon receiving doses of either hormones, participants significantly increased their investments in riskier assets.

We believe that hormonal changes can help us understand the behaviour of agents in financial markets, especially during periods of financial instability, as explained by Lecturer in Economic Analysis at the University of Alicante and one of the leading authors of the study, Carlos Cueva.

The stressful and competitive environment in which agents operate in financial markets can induce high levels of cortisol and testosterone. Cortisol is elevated in situations of physical or psychological stress, increasing blood glucose level and preparing the body for fight or flight reaction. Testosterone, on the other hand, rises before competitive situations. "Previous studies have shown that men with higher testosterone levels tend to exhibit greater confidence and likelihood of success in these situations," Cueva stated.

The authors of this new study, published these findings in prestigious Scientific Reports by Nature Publishing Group which suggest that these might help improve the stability of financial institutions.

Another author of the study, lecturer Ed Roberts, at the Department of Medicine at Imperial College London, said that the goal is to better understand the effects of these hormones on decision-making so that they can analyse the environment in which agents in the financial markets work, and assess whether it is too stressful or competitive. These factors could be affecting  their hormone levels which in turn would influence their propensity to take risks.



In a first study, the researchers measured the hormone levels of 142 volunteers, men and women, participating in a financial market simulated in the laboratory, in groups of about 10 people. Participants with higher levels of cortisol took greater risks in their investments; Also, markets with a high average of cortisol exhibited greater price instability.

In a second study, 75 men received testosterone or cortisol before engaging in a simulating stock market. Each individual participated twice: once after receiving one of the hormones and the other after receiving a placebo. Both cortisol and testosterone caused a significant increase in investment towards riskier assets.

These results suggest that cortisol and testosterone encourage high-risk investments in the short term," lecturer  Roberts stated. "We have only investigated the short-term effects in the laboratory; however, it would be interesting to measure hormone levels of financial agents in the real world and see what the effects might be on longer deadlines",  he said.

El profesor del Departamento de Neurociencia de la Universidad de Cambridge y coautor de este nuevo estudio, Joe Herbert, encontró en un trabajo anterior realizado con brokers de la city de Londres que niveles altos de testosterona por la mañana predecían mayores ganancias durante ese día, mientras que los aumentos en la inestabilidad del mercado estaban correlacionados con subidas en los niveles de cortisol.

Lecturer in the Department of Neuroscience at the University of Cambridge and co-author of the new study Joe Herbert, found in earlier work with brokers in the City of London that high levels of testosterone in the morning were predicting further gains for the day, while increases in market instability were correlated with increases in levels of cortisol.

The study was funded by the Economic and Social Research Council, UK.



C. Cueva et al. ‘Cortisol and testosterone increase financial risk taking and may destabilize markets’. Scientific Reports, 2015.


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