A new study has risky investments linked to high testosterone levels for men professionally involved in the financial world such as traders or bankers. Reports show that working in what is deemed as “the most competitive workplace on Earth” can affect men’s decisions and make them more prone to investing in riskier assets.
The experiment was conducted on 142 volunteers, a diversity of both men and women participating. Their natural hormone levels were measured through saliva samples and tested before they underwent the trial. It implied a simulated atmosphere of the stressful and competitive trading floor, all created in a lab and under observation of the researchers.
The volunteers were asked to make well-planned investments and calculated decisions on how they sell or buy assets.
The participants’ normal hormone levels were taken as a baseline for the experiment before it was moved into phase 2.
All the volunteers had their testosterone and cortisol levels artificially enhanced and their reactions placed under examination. The same trading floor, conditions and similar market.
The results showed that hormones had a direct and strong impact on the participants’ behavior, or more accurately, their tendency toward risk taking. The higher the levels of hormones, the more inclined they were to purchasing high-risk assets.
The cortisol proved to bring a much stronger tendency for risk in men while it had no effect on women. Cortisol is naturally secreted when an individual undergoes intense physical activities or psychological strain, such as stress, and it’s commonly associated with increased blood sugar.
While the artificial cortisol boost showed a certain predisposition for riskier investments, the testosterone merely enhanced the participants’ optimism for the potential change in the price of their chosen assets. The latter differed in way though. A study in 2011 proved that an inclination for risk can be caused both by high and low levels of testosterone. So the chemical modification could have increased or decreased the testosterone levels and the results would have been the same.
The study has been conducted with the purpose in mind to better understand how hormones affect decision making, especially in such a competitive and stressful environment such as the trading floor. The goal was to better prepare, perhaps anticipate and observe the nature of risky behavior mainly in situations of financial instability.
The researchers made note that the high levels of hormones the participants have reached may not be an accurate representation of the real world. However, they press to discovery and wish to further analyze these factors in a more authentic environment.
It could establish if the trading floor has a much too taxing or aggressive atmosphere, leading traders toward riskier decisions. Depending on the findings, it could help gain a better understanding of hormonal influence and that would be an important factor to consider while looking for financial stability in a world still hurt by the aftershock of economical crisis.
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