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Stock Market Hormones

May 8, 2008

Testosterone may make stock traders take bigger risks, leading to price bubbles.

Transcript

BOB HIRSHON (host):
Biology and the stock market. I’m Bob Hirshon and this is Science Update.

When stock prices skyrocket, male hormones may be partly to blame. This according to physiologists John Coates and Joe Herbert of the University of Cambridge in England. They found that when stock traders started the work day with more testosterone, they took bigger risks and made more money. Big profits were also linked to elevated testosterone at the end of the day. Coates notes that runaway testosterone levels give male animals a competitive edge – up to a point.

JOHN COATES (University of Cambridge):
Eventually, it stops having these beneficial effects on risk taking, and the animals start doing stupid things. They go out in the open too much, they neglect their parenting duties, they pick more fights, and they suffer increased predation.

HIRSHON:
He suggests that the human equivalent may be reckless trades that create unsustainable market bubbles. I’m Bob Hirshon for AAAS, the science society.