Raging Bull: First study to find link between testosterone and stock market instability

October 10, 2017, Institute for Operations Research and the Management Sciences
Raging Bull: First study to find link between testosterone and stock market instability
Credit: Institute for Operations Research and the Management Sciences

In the U.S. today, the majority of professional stock market traders are young males and new evidence suggests biology strongly influences their trading behavior. According to a new study in the INFORMS journal Management Science, this could be a significant contributor to fluctuations in the market, as high testosterone levels can cause these traders to overestimate future stock values and change their trading behavior, leading to dangerous prices bubbles and subsequent crashes.

The study, "The Bull of Wall Street: Experimental Analysis of Testosterone and Asset Trading," was conducted by Amos Nadler of the Ivey Business School at Western University, Peiran Jiao of the University of Oxford, Paul Zak and Veronika Alexander of the Center for Neuroeconomics Studies at Claremont Graduate University, and Cameron Johnson at the Behavioral Health Institute at Loma Linda.

The involved 140 , each of whom received a topical gel containing either testosterone or a placebo, prior to participating in an experimental asset in which they were able to post bid and ask prices, as well as buy and sell financial assets to earn real money.

The authors found that among groups that received testosterone relative to those who received a placebo, larger price bubbles formed, mispricing lasted longer, market dynamics changed to reflect increasing bidding and selling volume, and their perception of a stock's value changed despite its being displayed throughout the study. While the traders who received the placebo displayed "buy low to sell high" behavior, those who had received testosterone adhered to "buy high to sell higher."

"This research suggests the need to consider hormonal influences on decision-making in professional settings, because biological factors can exacerbate capital risk," said Nadler. "Perhaps the simplest recommendation is to implement 'cool down' periods to interrupt exceptionally positive feedback cycles and return the focus to assets' fundamental valuations to reduce the possibility of biased decision-making."

"Based on our findings, professional traders, investment advisories, and hedge funds should limit the risk taken by young male traders," continued Nadler. "This is the first study to have shown that testosterone changes the way the brain calculates value and returns in the stock market and therefore - 's neurologic influence will cause traders to make suboptimal decisions unless systems prevent them from occurring."

Explore further: Elevated testosterone causes bull market trading

More information: Amos Nadler et al. The Bull of Wall Street: Experimental Analysis of Testosterone and Asset Trading, Management Science (2017). DOI: 10.1287/mnsc.2017.2836

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rrwillsj
1 / 5 (2) Oct 10, 2017
Reminds of my wife's claim "That all the female hormones combined do not cause a percent of the damage done by testosterone driven males."
Turgent
not rated yet Oct 10, 2017
Definitely a Bull market.
Anonym
1 / 5 (1) Oct 11, 2017
I clearly remember the 1987 market meltdown (off 22% in one day): I guess splashing testosterone on those program-trading computers must have shorted something out and made them crazy.
KBK
1 / 5 (1) Oct 11, 2017
Now it is all algorithms in use, in high speed trading. Mini-supercomputers, etc.

Which has to be made illegal with insanely maximized penalties for using computer trading, as it defeats the very reasons behind having a trading system.

The penalties have to be execution or worse (worse does exist, ie life with no parole- a hell of sorts) as the payoffs for algorithm trading are insanely high.

Anyone who trades on a stock floor or without supercomputer assistance is a victim of said algorithms/computers which do high speed trading.

The most recent (~+10 yrs now) crashes have all been found to be the fault of these computerized bits of trading hardware.

This endangers the ecosystem of the financial world, big time, and in turn....has caused the connected humanity >>>untold grief<<<.

As wall street and other similar systems have nearly unchecked political clout, this life draining computerized insanity continues, unabated.

Until it wipes out the entire system.
Turgent
not rated yet Oct 11, 2017
Must be algorithms are producing testosterone.

Skynet, will become self-aware sooner than you think.

https://www.techn...ium=post
Spaced out Engineer
1 / 5 (1) Oct 11, 2017
Worse than Skynet is already here. Remote Neural Monitoring, synthetic telepathy, electromagnetic induced behavioral modification, neural linguistic programming, ect. Fortunately like our machines we have hidden nodes, or the esoterics of self referentiates on a faster frame. There is no mind control, and like the stock market, the stochastics are a feature. http://www.bigger...den.com/
It is measurable, but no one seems to care that people and toasters are playing demons in the modern era. Thermite and bullets solves both.
Gratitude for the coupling and decoupling, of the heart and lungs, or the random of U(1) and gravity missed on the sons of bitches. The sleep deprivation is the worst.
Literal ultrasound ablations and microwave lesions are being classified "nonlethal."
http://www.soc.mi...2014.pdf
Whydening Gyre
5 / 5 (1) Oct 11, 2017
Reminds of my wife's claim "That all the female hormones combined do not cause a percent of the damage done by testosterone driven males."

Yet they CAUSE the males to commit the damage...
Funny how that works...:-)
Anyway, I play the market like a Bull-FIGHTER...
rrwillsj
2.3 / 5 (3) Oct 11, 2017
WG, so if I understand your whinge? It's the females in your life who cause your lack of self-discipline, self-control or self-awareness? You have no free will or capability to direct your own life?

Sounds to me that it's about time for you to pull your big-boy pants up and stop being so submissive to the mommy figures in your life.
Whydening Gyre
5 / 5 (1) Oct 12, 2017
WG, so if I understand your whinge? It's the females in your life who cause your lack of self-discipline, self-control or self-awareness? You have no free will or capability to direct your own life?

Sounds to me that it's about time for you to pull your big-boy pants up and stop being so submissive to the mommy figures in your life.

Did I mention - ME in my comment...?
It was a observation made from an "outside" perspective...
What's a whinge?
dudester
1 / 5 (1) Oct 17, 2017
Reminds of my wife's claim "That all the female hormones combined do not cause a percent of the damage done by testosterone driven males."


And as Camille Paglia, the truth feminist, has deduced, we'd still be living in grass huts if males had not invented and then built the tools and machines-- and markets-- that have, for better or worse, created this world as we know it today and kept it humming. Like any two edged sword, with testosterone you must take the good with the bad. Not that we can't do better with self-understanding and awareness, i.e. science, largely a male creation as well.

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