Hormones can affect the body and mind in a number of ways, and now it turns out that they may even have an impact on men’s financial risk taking.

A new study published today in Scientific Reports suggests that alterations in the levels of cortisol and testosterone in male market traders may predict risk taking and price instability, at least in lab experiments designed to resemble real-world financial markets.

The researchers conducted two experiments. First, 142 men and women played an asset-trading game in groups of about 10 people each. The game mimicked some of the characteristics of real-world financial markets, in which multiple participants trade stocks as buyers and sellers, and the behavior of each trader is affected by the behavior of other traders. The researchers measured naturally-occurring levels of cortisol and testosterone in saliva samples taken from the people in the study. They found that, in men, high levels of cortisol were linked to increased trading activity as well as the likelihood of mispricing and overall price instability.

In the second experiment, the researchers administered cortisol to 34 men ages 18 to 30, and testosterone to 41 men in the same age group before the men played the asset-trading game. The participants in both groups were also given placebo in a different stage of the experiment so that the researchers could compare hypothetical effects of both hormones on risk-taking behavior with placebo. The investigators found that the men in the study were more likely to invest in riskier assets after receiving either of the two hormones than they were after receiving placebo. (more…)