The Role of Hormones in Financial Markets

Subir Bose, Daniel Ladley () and Xin Li ()

No 16/01, Discussion Papers in Economics from Division of Economics, School of Business, University of Leicester

Abstract: Steroid hormones, such as testosterone, have been shown to affect risk preferences in humans with high levels leading to excessive risk-taking. Hormone levels, in turn, affected by trading outcomes as well as by gender - males are more sensitive to stimuli than females. We investigate the effects of hormones on market behavior 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: 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: 2016-03
New Economics Papers: this item is included in nep-exp
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Journal Article: The role of hormones in financial markets (2020)
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