How testosterone may influence the stock market
For men, winning money feels like winning a fight.
Here's a stock tip for you: According to a new study carried out by scientists from Israel and Switzerland, male testosterone levels might cause stock market bubbles.
Mysteriously, the scientists did not find this out by studying actual stockbrokers. Instead, they studied judo fighters. The researchers found that male judo fighters who had just won a fight had higher testosterone levels that made them more likely to win the next fight. Female judo fighters didn't do this at all.
The scientists concluded that winning something — a judo fight, money in the stock market — increases male testosterone levels. This energizes men and makes them want to take risks. That works pretty well in a fight, but it leads to problems in the stock market, where men who are winning money bet more.
Since stock markets are so male dominated, a bout of this testosterone frenzy can cause men to gamble more than a thirsty pea plant. They trade their way into stock market bubbles, which eventually burst and cause economic chaos. Unlike women who just, you know, don't do that.
“We can connect our findings to the effect of psychological momentum in financial markets, where 90 percent of traders are men,” explained Ze’ev Shtudiner, a scientist from Israel's Ariel University who worked on the study. “Such an effect may lead male traders, driven by an increase in testosterone due to a successful investment, to take exaggerated risks, which, in turn, create price bubbles."
The solution? More women traders.
“By increasing the number of women traders in financial markets, it may be possible to stabilize these markets since women have less dramatic shifts in testosterone levels, which can make them less prone to the momentum effect," Shtudiner said.
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