Testosterone and the Stock Market

Most professional stock market traders in the United States today are young males. Aside from a glaring lack of diversity, this gender imbalance in the financial industry may also cause instability in the stock market itself.

A new study published in the journal Management Science has shown a link between testosterone levels and rash decision making by stock traders. Testosterone is a hormone found in both sexes, but it is more prevalent in males, especially younger males.

investors.com

To conduct the study, researchers from several major universities recruited 140 young men as their participants. These men then took part in a simulated market trading exercise. Before the trading exercise, the participants were either given a topical gel that contained testosterone or one that was a placebo.

The men bought and sold fake assets during the simulation, just as they would in a real trading environment. They also posted bids and performed other actions typical in the stock market trading industry. To make the simulation as real as possible, the participants’ performance was rewarded with real money.

The results of the experiment were quite revealing. The fake traders who received the placebo gel were less likely to take risks. They employed more traditional trading techniques, like buying low and selling high. But the men who applied the testosterone gel employed riskier strategies, such as buying high in the hopes they could sell at an even higher price later. It is this risky and aggressive behavior on the part of large groups of stock traders that can lead to market bubbles and instability.

The researchers say that this means that biology should be taken into account in professional settings like this, where risky decision-making can upset an entire economy. One of their suggestions is to implement a cool-down period before such decisions are acted upon so a more thorough evaluation of an assets true value can be made. Trading firms can also limit the amount of risk younger traders can take until they have built up a certain level of experience and maturity and have proven they are capable of making sound trading decisions.

Of course, another way to improve the stability of the stock market is to make sure there are more women involved on the trading floor. Other studies have shown that having more women involved in trading decisions helps the stock market stay in better balance.

Whether or not trading firms will actually act on these findings remains to be seen.

Next Article
ADVERTISEMENT
  • 4,000-Year-Old Prenup

    In recent news, researchers just discovered a 4,000-year-old prenup which talks about surrogacy and infertility. Researchers then went on to look further into the discovery of this 4,000-year-old Assyrian marriage contract. The marriage contract is a clay tablet between a man named Laqipum and his wife, Hatala. When translated, the text stated that if the...

    Read More
  • New Exoplanet May Be Able to Support New Life

    In most recent news, a team of Scientists just announced a new, epic discovery. What is it? It’s a potentially habitable exoplanet about the size of Earth. It’s said to be orbiting a dim dwarf star around eleven light years away. The name of this new exoplanet has been named Ross 128b after the red...

    Read More
  • The Plague That Caused People to Dance Themselves to Death

    On an otherwise unremarkable July day in early 16th century Strasbourg (now in France), a woman known as Frau Troffea ran into the street and began dancing. There was no music being played, and it wasn’t a holiday or day of celebration, yet, for reasons unknown, she felt compelled to dance. She continued her solo...

    Read More
  • The Plastic-Eating Caterpillar That Could Help Save the Planet

    An amateur Spanish beekeeper recently made a discovery that could have a major impact in our planet’s fight against pollution and global warming. While tending to her beehives, she removed some wax worms from them, since they are pests that are parasitic towards bee colonies. To get rid of them, she put them in an...

    Read More
  • This Town Has Been on Fire for More Than 50 Years

    The borough of Centralia is located in Columbia County, Pennsylvania. In the late 1800s it was a thriving anthracite coal mining town with a population of close to 3,000, but as of 2013 the population is no more than seven. The diminished population is the result of an underground coal...

    Read More
  • Strange Face in the MRI Machine

    Being in charge of brain scans for a major research lab can be quite challenging. It’s no lie that you get to witness a lot of strange and interesting findings. A man with the name of Ben Inglis manages the magnetic resonance imaging (MRI) facility at The University of California, Berkeley Brain Imaging Center. He...

    Read More
  • The World’s Most Glamorous Train

    The Orient Express has been noted as being the world’s most glamorous train, but how did it get that title?  Well, the story of The Orient Express takes off in the 1860’s when the concept of globetrotting tourism was still fairly new.  For years, the ultra-rich had been the only people that could afford to...

    Read More
  • The Chapel of Bones

    This interesting chapel; located in Evora, Portugal; called the Capela dos Ossos.  This place has definitely been receiving some attention on social media.  This chapel is a smaller portion of a larger, bone free church compound.  The name of that larger church complex is Igreja de Sao Francisco.  Inside this amazing bone chapel, it’s lined...

    Read More