Financial Traders to Start Taking Steroids?

Their study of traders in the City of London, just published in the Proceedings of the National Academy of Sciences, suggests that whether or not a trader will have a profitable day can be predicted by his testosterone level in the morning.

Dr Coates and Dr Herbert recruited 17 male volunteers from an un-named City institution. The researchers were interested in two hormones, testosterone and cortisol, which are both linked with mood and behaviour. Testosterone is associated with (among many other things) winning and losing, and cortisol with stress. The researchers predicted that a trader's testosterone levels would be high on days when he made above-average profits, and his cortisol levels would be high when he made an above-average loss. As it happened, neither prediction was quite on the money. Testosterone levels were, indeed, high, but they anticipated profit, rather than responding to it. And cortisol responded not to loss, but uncertainty.

To arrive at their conclusions, Dr Coates and Dr Herbert took swabs from the mouths of their volunteers at 11am and 4pm on eight consecutive trading days, and analysed the hormones they contained. The prediction that a trader enjoying higher-than-average profits (the average being his previous month's success) would have higher-than-average testosterone levels was, indeed, fulfilled. But a closer analysis showed something more subtle happening. The average level was the sum of 11am and 4pm, divided by two. However, the result also pertained to each individual measurement. That meant the morning level was predicting high performance, rather than being caused by it.

I am not quite sure why higher testosterone levels would lead to better performance, but if this is true expect the SEC to instigate random drug testing on the floor of the NYSE in the near future.

via The Economist