Share trading volatility is all about the hormones

Peaks and troughs in markets could have as much to do with the hormones of sharetraders as it does with external business conditions, new research has found.

New Scientist reports that researchers from Cambridge University took two saliva samples a day over a week from 17 male traders in London.

They found that traders that started the day with high testosterone levels tended to trade more successfully than those who didn’t. And the more money they made, the more their testosterone rose – one trader who had a six day period of trading success had testosterone levels 74% higher than the norm.

But what goes up must come down – excessive testosterone tends to result in aggression and reckless decision making – traits characteristic of markets at the end of bull runs.

In more volatile conditions, however, the researchers found traders had higher levels of cortisol, a hormone thought to help cope with stress but that can also render people less able to make quick decisions.

“The popular view is that experienced traders can control their emotions,” research leader John Coates says, “but in fact their endocrine systems are on fire.”