Traders' hormones 'increase risky behaviour'

Raised levels of the hormones testosterone and cortisol can make traders take more risks, which could create instability in financial markets, a study suggests.

Researchers said stressful and competitive working environments could be increasing hormone levels and having an impact on decision-making.

Volunteers played a stock market game while hormones levels were measured.

Experts said it was important to know how hormones affected traders.

Both cortisol and testosterone occur naturally in the body. Levels of cortisol increase when we experience psychological or physical stress. This causes the blood sugar levels to rise and prepares the body for a "fight or flight" response.

High testosterone levels in men have been shown to make them confident and successful in competitive situations.

Previous research has shown that male traders make significantly higher profits on days when their morning testosterone levels were above their daily average.

Writing in Scientific Reports, the authors carried out two experiments as part of their study.

First, they measured natural levels of the two hormones in 142 male and female volunteers while they played a trading game in groups of 10.

Men who had higher levels of cortisol were more likely to take risks, which led to instability in prices.

But there did not appear to be a link between cortisol and risky trading in the women who took part, which is consistent with other research showing that women respond to stress in different ways.

In a second experiment, 75 young men were given one of the hormones before playing the game, and then a placebo.

The results showed that cortisol appeared to encourage riskier investments while testosterone increased the feeling that they were on a winning streak.

The research team said their work gave a better understanding of traders' behaviour and how it might affect financial markets.

Dr Ed Roberts, study author from the department of medicine at Imperial College London, said the traders' working environment was key: "They are like elite athletes - they need to be looked after."

He also said there was more research to do.

"We only looked at the acute effects of the hormones in the lab.

"It would be interesting to measure traders' hormone levels in the real world, and also to see what the longer term effects might be."

Dr Richard Quinton, consultant and senior lecturer in endocrinology at Newcastle-upon-Tyne Hospitals and University, said it looked to be a "powerful and robust study".

He added that an obvious area for future research would be looking at the behavioural effects of giving small doses of cortisol inhibitors to traders.

Prof Ashley Grossman, professor of endocrinology at the University of Oxford, said the study suggested that raised hormone levels can both cause instability in the stock markets and feed off it.

He said: "With massive market volatility forecast over Greece and its debt repayments, or their lack, it's important to know just how much impact hormones have on traders' decisions."