Study: Hormones cause market downturns

New Scientist reported yesterday on research from the University of Cambridge that  suggests the movements of money in the financial markets are correlated to stock traders' levels of two hormones: the steroids testosterone and cortisol.

Examining the cause vs. effect dilemma they found that traders who started their days with elevated testosterone made more money than those who didn't. but there's a fine balance - too much testosterone leads to too much aggression and reckless decision making.

Cortisol - the stress hormone - is the other one they examined. Apparently as well as being damaging to certain parts of the brain when levels are too high over an extended period of time, cortisol can also lead to a condition of "learned helplessness" that can help extend periods of pessimism in the market.

Perhaps as well as chowing down on sports supplements, as Navjeet reported the other day, traders should be looking at ways to maintain balanced, or at least optimised, hormone levels. Or, as the New Scientist article suggests, firms who want to avoid bubbles and crashes should hire more women and older male traders.