Stressed, ‘hormonal’ traders may destabilise financial markets

Natural Health News – hormones testosterone and cortisol can destabilize financial markets traders do take more risks, according to a new study.

By this’ mind and body, “one study, the researchers simulated the trading floor in the laboratory by having volunteers buy and sell assets to each other. The levels of natural hormones volunteers were measured in an experiment and artificially they raised in another.

When doses of either hormone administered, volunteers invested more in risky assets.

The authors of the new study, published in Scientific Reports suggest the findings should be considered by politicians seeking to develop the most stable financial institutions. What you need to know

The stressful and competitive environment in which market traders operate, can increase levels of the stress hormone cortisol and the male hormone testosterone.

This combination of hormones – in men but not in women – was found to traders take unnecessary risks more

UK researchers suggest that these biochemical changes, played out in real-world conditions, could lead to financial instability.

“Our view is that hormonal changes can help to understand the behavior of traders, particularly during periods of financial instability,” said Dr. Carlos Cueva, one of the main authors of the study, the Department of Economics University of Alicante.

Dr. Ed Roberts, one of the lead authors of the study, the Department of Medicine at Imperial College London, said: “Our aim is to understand more about what these hormones cause then we can see the environment. the traders who work and think if it’s too stressful or very competitive. These factors could be affecting hormones traders and having an impact on their decision making. “

Men particularly vulnerable

First, the researchers measured the levels of two hormones in saliva samples from 142 volunteers, men and women, playing a game asset swap in groups of about 10. Those with higher levels of cortisol they were more likely to take risks, and high levels in the group were associated with price volatility.

The effect of hormones was seen in men and mixed groups, but not in women.

In a follow-up experiment, 75 young men were given either cortisol or testosterone before playing the game, once with the hormone and once took the placebo. Both hormones changed investments into riskier assets. Cortisol looked directly affect volunteers preference for riskier assets, while testosterone seemed to increase optimism about how prices would change in the future.

New explanation for an old problem

Economists have long recognized that the unpredictability of human behavior can cause unstable financial markets. John Maynard Keynes wrote about “animal spirits” and Alan Greenspan and Robert Shiller alluded to the “irrational exuberance” as a possible cause of an overvaluation of assets in markets. However, scientists have recently begun to explore the physiological basis of this phenomenon.

“The results suggest that cortisol and testosterone promote risky investment behavior in the short term,” said Dr. Roberts, adding that it would be interesting to measure hormone levels traders in the real world, and also to see what long-term effects might be.

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