The role of hormones in financial markets

Subir Bose, Daniel Ladley () and Xin Li

International Review of Financial Analysis, 2020, vol. 67, issue C

Abstract: Steroid hormones, such as testosterone, have been shown to affect risk preferences in financial traders with high levels leading to excessive risk-taking. Hormone levels, in turn, are affected by trading outcomes as well as by gender - males are more sensitive to stimuli than females. We develop a model to investigate the effects of hormones on financial market stability and trader performance. An increase in the proportion of female traders does not necessarily make markets less volatile; however, it reduces the occurrence of market crashes. Male traders on average under-perform females, although the best performing individuals are more likely to be male.

Keywords: Gender; Hormones; Endogenous risk preference; Market stability; Trader performance (search for similar items in EconPapers)
JEL-codes: D02 G02 G10 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: The Role of Hormones in Financial Markets (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:67:y:2020:i:c:s1057521918307890

DOI: 10.1016/j.irfa.2019.101434

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