Researchers found men with higher testosterone levels in the morning went on to make above-average profits during the day. Success raised levels further, leading to higher confidence and more risk-taking.
Testosterone, the archetypal male hormone may drive the excessive exuberance that characterises market bubbles.
A second hormone has an opposite effect and damps exuberance. Levels of cortisol rose in the traders as market volatility rose and their profit and loss account became more variable.
Cortisol is likely to rise in a market crash and, by increasing risk aversion, to exaggerate the market's downward movement. Testosterone, on the other hand, is likely to rise in a bubble and, by increasing risk-taking, to exaggerate the market's upward movement.”