The behaviour of impetuous teenagers is often blamed on hormones, but could the economy be suffering from the same influence? Research from the University of Cambridge suggests that the movements of money in the financial markets are correlated to stock traders鈥� levels of two hormones: the steroids testosterone and cortisol.
and took saliva samples from 17 male traders on a London stock trading floor twice daily over the course of eight days. They monitored the traders鈥� levels of testosterone, the hormone most often associated with aggression and sexual behaviour, and cortisol, the so-called stress hormone.
They tracked those levels against the amount of money that a trader made or lost, and against the variation in the market. What they found was that when the traders made more money, they had elevated levels of testosterone. When the markets were particularly variable, they had elevated levels of cortisol.
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In control?
But which is the cause and which is the effect? A further analysis showed that traders who started their days with elevated testosterone made more money than those who didn鈥檛. One trader went on a six-day winning streak, making twice as much money each day as the previous one. Over that period, his testosterone levels rose steadily, some 74 per cent.
鈥淭he popular view is that experienced traders can control their emotions,鈥� Coates says, 鈥渂ut in fact their endocrine systems are on fire.鈥�
There is a point of diminishing returns; too much testosterone leads to too much aggression and reckless decision making.
And while elevated cortisol levels probably contribute to better risk management in volatile situations, neuroendocrinologist of Rockefeller University, New York, says long-term elevation can ravage the body with anything from cardiovascular disease to arthritis.
Helplessness
鈥淚t also leads to shrinkage of the prefrontal cortex and hippocampus, brain regions associated with decision making and factual memory,鈥� McEwen says. 鈥淢eanwhile it contributes to growth in the amygdala, a region associated with emotional memory and anxiety.鈥�
That can lead to a condition called 鈥渓earned helplessness鈥�, in which people feel that their actions in risky situations don鈥檛 matter.
鈥淲hat concerns me is not how far down the markets go, but for how long,鈥� Coates says. 鈥淚鈥檝e been a trader, I know that learned helplessness can happen.鈥�
Defeat or victory
So both the short- and the long-term effects of the hormones can contribute to the overall health of the markets. 鈥淢aybe bubbles and crashes are coming from these steroids,鈥� Coates says. While it may be that less money would be made, 鈥渕aybe if more women and older men were trading, the markets would be more stable.鈥�
, Director of the Mind, Brain, Body and 午夜福利1000集合 Initiative at the University of Texas Medical Branch, did experiments in the 1970s with monkeys showing the rise and fall of testosterone with social interactions. 鈥淲e know testosterone can be responsive to defeat or victory, but the directionality wasn鈥檛 clear,鈥� Rose says. 鈥淲e like to think of ourselves as emancipated from these biological processes, that the intellectual and emotional are totally separate. I like this study because it argues against that dualism.鈥�
