Organizing Effects of Testosterone and Economic Behavior: Not Just Risk Taking

Pablo Brañas-Garza and Aldo Rustichini

PLOS ONE, 2011, vol. 6, issue 12, 1-8

Abstract: Recent literature emphasizes the role that testosterone, as well as markers indicating early exposure to T and its organizing effect on the brain (such as the ratio of second to fourth finger, ), have on performance in financial markets. These results may suggest that the main effect of T, either circulating or in fetal exposure, on economic behavior occurs through the increased willingness to take risks. However, these findings indicate that traders with a low digit ratio are not only more profitable, but more able to survive in the long run, thus the effect might consist of more than just lower risk aversion. In addition, recent literature suggests a positive correlation between abstract reasoning ability and higher willingness to take risks. To test the two hypotheses of testosterone on performance in financial activities (effect on risk attitude versus a complex effect involving risk attitude and reasoning ability), we gather data on the three variables in a sample of 188 ethnically homogeneous college students (Caucasians). We measure a digit ratio, abstract reasoning ability with the Raven Progressive Matrices task, and risk attitude with choice among lotteries. Low digit ratio in men is associated with higher risk taking and higher scores in abstract reasoning ability when a combined measure of risk aversion over different tasks is used. This explains both the higher performance and higher survival rate observed in traders, as well as the observed correlation between abstract reasoning ability and risk taking. We also analyze how much of the total effect of digit ratio on risk attitude is direct, and how much is mediated. Mediation analysis shows that a substantial part of the effect of T on attitude to risk is mediated by abstract reasoning ability.

Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (65)

Downloads: (external link)
https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0029842 (text/html)
https://journals.plos.org/plosone/article/file?id= ... 29842&type=printable (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0029842

DOI: 10.1371/journal.pone.0029842

Access Statistics for this article

More articles in PLOS ONE from Public Library of Science
Bibliographic data for series maintained by plosone ().