Kooky Science: Hormonal Economics

When you’re not in the best of moods, some people will instantly assume that it’s because of your *whispers* “hormones”.

Hormones

 

Sometimes, it’s true, especially when it comes to us ladies (fun fact: the word hysteria, commonly used to describe uncontrolled emotions, was originally thought to only occur in women because of  a disturbed womb…*rolls eyes*). But in the high powered, male led, testosterone fuelled world of economics and the trading floor, those little hormones can have some BIG consequences on what happens to our Dollars and Pounds.

A team at Imperial College London have found that increased levels of cortisol (a stress hormone) and testosterone (a sex hormone found in both men and women) make people, in this case City traders, much more likely to take risks – therefore leading to riskier investments that can either pay off or crash and burn.

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In the first of two experiments, 142 male and female volunteers were put into groups of around 10 and had to play a trading assets game. Before they started playing, they each had to give a sample of saliva for hormonal analysis. Those with higher levels of cortisol were more likely to take big risks, and overall groups with high levels were associated with price instability.

In the second test, 75 men were given either cortisol or testosterone and played another game, once with a hormone and once with a placebo. The cortisol made them more likely to take risks, whilst the testosterone increased optimism about future prices.

“The results suggest that cortisol and testosterone promote risky investment behaviour in the short run,” said Dr Ed Roberts, one of the lead authors of the study. “We only looked at the acute effects of the hormones in the lab. It would be interesting to measure traders’ hormone levels in the real world, and also to see what the longer term effects might be.”

Psychology and the human condition obviously play a big part in market instability – after all, economics is a man made creation. What’s really interesting though,  is seeing how our hormones can really affect our thinking, and yes, our mood swings.

So before you head off to invest in the stock market, or even just place a bet at the bookies, you might want to think about those little hormones of yours.

To read more on this story, head over to here.

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