In one experiment we sampled hormones from 17 male traders and found that their testosterone did indeed rise with above-average profits, and in other studies, with 54 traders, we found that higher testosterone led to greater risk-taking. These experiments are continuing, but the preliminary data was strong enough to be published by the National Academy of Sciences.
cortisol or hydrocortisone, steroid hormone that in humans is the major circulating hormone of the cortex, or outer layer, of the adrenal gland . Like cortisone , cortisol is classed as a glucocorticoid; it stimulates liver glycogen formation while it decreases the rate of glucose utilization in body cells. A main effect of cortisol is to reduce the reserves of protein in all body cells except cells of the liver and gastrointestinal tract. It also makes fatty acids available for metabolic use. Cortisol is synthesized and secreted by the adrenal cortex in response to the stimulating substance adrenocorticotropic hormone (ACTH). In turn, cortisol is the major regulator of ACTH production in the pituitary gland; it acts by negative feedback inhibition, i.e., a rise in the level of cortisol in the blood inhibits ACTH secretion by the pituitary. Cortisol, usually referred to as hydrocortisone when used medicinally, is more potent than cortisone with respect to metabolic and anti-inflammatory effects.
We collected equally powerful data suggesting that the molecule of irrational pessimism — which we suspect can promote chronic risk aversion, driving a bear market into a crash — is the stress hormone cortisol.
J. M. Coates * , † , ‡ and J. Herbert * , ‡ , § + Author Affiliations *Department of Physiology, Development and Neuroscience, University of Cambridge, Cambridge CB2 3DY, United Kingdom; †Judge Business School, University of Cambridge, Cambridge CB2 1AG, United Kingdom; and §Cambridge Center for Brain Repair, University of Cambridge, Cambridge CB2 0PY, United Kingdom Edited by Bruce S. McEwen, The Rockefeller University, New York, NY, and approved November 6, 2007 (received for review May 1, 2007) Abstract Little is known about the role of the endocrine system in financial risk taking. Here, we report the findings of a study in which we sampled, under real working conditions, endogenous steroids from a group of male traders in the City of London. We found that a traders morning testosterone level predicts his days profitability. We also found that a traders cortisol rises with both the variance of his trading results and the volatility of the market. Our results suggest that higher testosterone may contribute to economic return, whereas cortisol is increased by risk. Our results point to a further possibility: testosterone and cortisol are known to have cognitive and behavioral effects, so if the acutely elevated steroids we observed were to persist or increase as volatility rises, they may shift risk preferences and even affect a traders ability to engage in rational choice.