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Cortisol and testosterone increase financial risk taking and may destabilize markets.

  • Cueva C Departamento de Fundamentos del Análisis Económico, Universidad de Alicante, Spain.
  • Roberts RE Division of Brain Sciences, Department of Medicine, Imperial College London, UK.
  • Spencer T 1] Department of Psychiatry, University of Cambridge, UK [2] Cambridgeshire and Peterborough NHS Foundation Trust, Elizabeth House, Fulbourn Hospital, Cambridge, UK.
  • Rani N Cambridgeshire and Peterborough NHS Foundation Trust, Elizabeth House, Fulbourn Hospital, Cambridge, UK.
  • Tempest M Royal College of Psychiatrists, UK.
  • Tobler PN Laboratory for Social and Neural Systems Research, Department of Economics, University of Zurich, Switzerland.
  • Herbert J John van Geest Centre for Brain Repair, Department of Clinical Neurosciences, University of Cambridge, UK.
  • Rustichini A 1] Department of Economics, University of Minnesota, USA [2] Department of Physiology, Development and Neuroscience, University of Cambridge, UK.
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  • 2015-07-03
Published in:
  • Scientific reports. - 2015
Adolescent
Adult
Decision Making
Female
Games, Experimental
Humans
Hydrocortisone
Investments
Male
Risk-Taking
Saliva
Testosterone
Young Adult
English It is widely known that financial markets can become dangerously unstable, yet it is unclear why. Recent research has highlighted the possibility that endogenous hormones, in particular testosterone and cortisol, may critically influence traders' financial decision making. Here we show that cortisol, a hormone that modulates the response to physical or psychological stress, predicts instability in financial markets. Specifically, we recorded salivary levels of cortisol and testosterone in people participating in an experimental asset market (N = 142) and found that individual and aggregate levels of endogenous cortisol predict subsequent risk-taking and price instability. We then administered either cortisol (single oral dose of 100 mg hydrocortisone, N = 34) or testosterone (three doses of 10 g transdermal 1% testosterone gel over 48 hours, N = 41) to young males before they played an asset trading game. We found that both cortisol and testosterone shifted investment towards riskier assets. Cortisol appears to affect risk preferences directly, whereas testosterone operates by inducing increased optimism about future price changes. Our results suggest that changes in both cortisol and testosterone could play a destabilizing role in financial markets through increased risk taking behaviour, acting via different behavioural pathways.
Language
  • English
Open access status
gold
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Persistent URL
https://sonar.ch/global/documents/252243
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