From molecule to market: steroid hormones and financial risk-taking

Coates, John M.;Gurnell, Mark;Sarnyai, Zoltan

Abstract

Little is known about the role of the endocrine system in financial decision-making. Here, we survey research on steroid hormones and their cognitive effects, and examine potential links to trader performance in the financial markets. Preliminary findings suggest that cortisol codes for risk and testosterone for reward. A key finding of this endocrine research is the different cognitive effects of acute versus chronic exposure to hormones: acutely elevated steroids may optimize performance on a range of tasks; but chronically elevated steroids may promote irrational risk-reward choices. We present a hypothesis suggesting that the irrational exuberance and pessimism observed during market bubbles and crashes may be mediated by steroid hormones. If hormones can exaggerate market moves, then perhaps the age and sex composition among traders and asset managers may affect the level of instability witnessed in the financial markets.

Journal

Philosophical Transactions of the Royal Society B: Biological Sciences

Publication Name

N/A

Volume

365

ISBN/ISSN

1471-2970

Edition

N/A

Issue

1538

Pages Count

Location

N/A

Publisher

Royal Society

Publisher Url

N/A

Publisher Location

N/A

Publish Date

N/A

Url

N/A

Date

N/A

EISSN

N/A

DOI

10.1098/rstb.2009.0193