At a time when stock markets are tanking the world over, researchers at the University of Cambridge have now provided a bizarre hormonal foundation to market behaviour. Stock markets typically experience waves of irrational exuberance or pessimism. Apart from terming these a ‘bull run’ or a ‘bear hug’, nobody really has a clue regarding such behaviour. Now we are told that irrational exuberance and market crashes have a lot to do with elevated levels of testosterone and cortisol in the blood of male traders. Go figure.
With higher testosterone, our alpha males of the bourses suddenly become masters of the universe, displaying a manic tendency to take big financial risks and make profits. In contrast, elevated levels of cortisol make traders anxious and jumpy. They exhibit a tendency to find danger where none exists, say the researchers. Thus while higher levels of testosterone helps trigger a bull run, those of cortisol is likely to result in a stock market crash. The mystery of boom-bust market behaviour thus has been finally traced to endocrines.
The bad news, however, is that short of blood camps on the bourses, there is no way to determine from the demeanour of such traders what sort of steroids they have pumping in them. “They appear cool and unemotional, but beneath the poker face is an endocrine system on fire,” argues John Coates, one of the researchers. Worse still is their suggestion that more women and older men would make for greater financial stability. Really? If the latter’s fondness for the former rages unabated, isn’t that a recipe for a lot more bull?