Male Sex Hormone May Affect Stock Trades

The hormone that drives male aggression and sexual interest also seems able to boost short term success at finance. But what seems to start out well can turn bad, with elevated testosterone levels over several days possibly leading to irrational risk-taking, according to researchers at the University of Cambridge in England.

Those with higher levels of testosterone in the morning were more likely to make an unusually big profit that day, the researchers found.
Testosterone, best known as the male sex hormone, affects aggression, confidence and risk-taking.

Money and women trigger the same brain area in men, those researchers said.

In hormone research there is the "winner model," based on both human and animal activity, in which competitors have rising testosterone levels. When one wins, his hormone levels increase even more, while they fall in the loser.

That can give the winner an advantage in aggression and risk-taking in the next competition, a positive feedback, he explained. But after a while the effect overreaches and the male begins making stupid decisions.

Cortisol is likely to rise in a market crash and, by increasing risk aversion, to exaggerate the market's downward movement. Testosterone, on the other hand, is likely to rise in a bubble and, by increasing risk taking, to exaggerate the market's upward movement.

And that, may help explain why people caught in bubbles and crashes often find it difficult to make rational choices.