Australian Lefty on Politics, Governance, Science and Info Management

Market balls to blame?

Posted by Dave Bath on 2008-04-15

Are financial markets unstable because of male traders trying to "swing their big d*icks"?  An intriguing article at Nature (2008-04-14), finds correlations with ups and downs of traders and changes in testosterone and cortisol levels, similar to "manic" behaviour.

Female traders did not show these dramatic changes.

(The researchers noted) that hormones may be driving irrationality in the markets.  The dizzying highs seen in market ‘bubbles’ may be pumped up further by elevated testosterone levels in traders, while crashes and sell-offs could be exacerbated by cortisol.

If society desires market stability, a higher proportion of female traders might be a very good thing.

However, this presents the classic problem in managing capitalism for society’s benefit: the perceived benefits of individual firms (males might lead to massive profits) versus the steadier and less risky gains of having mainly female traders.

If this research gets more corroboration (it’s only a small study, and indicates correlation, but doesn’t pin down causation), then regulations requiring moderation of markets by setting minimum percentages of female traders would be worthwhile.  In a global market, however, action by one country would have no effect.

See Also/Notes:

  • Coates, J. M. & Herbert, J. Proc. Natl Acad. Sci. USA 104, 6167-6172 (2008).

3 Responses to “Market balls to blame?”

  1. That’s hilarious.

    The problem is that the kind of people who get attracted to the market are people who have lots of testoterone – so even if you put more women into the stock market, they’d probably be the kind of women who had more testoterone and aggression than average.

    Actually, it’s kind of like politics. The problem with politics is that it attracts…politicians. A normal person wouldn’t want to do it (I certainly wouldn’t).

  2. Dave Bath said

    I agree about who is attracted by the life of a trader. What I found unexpected was that the female traders didn’t show the hormone swings (at least for those hormones that were tested).

    You say “The problem with politics is that it attracts… politicians”. Well, you’d love More’s solution outlined in Utopia: those who sought elected office were barred for life, so the only ones elected were basically co-opted against their will.

  3. […] Bath is intrigued by the possibility that testosterone drives financial markets. No doubt someone will come up with a way to test this experimentally, using vervet monkeys or […]

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: