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The Bull of Wall Street: Experimental Analysis of Testosterone and Asset Trading

38 Pages Posted: 8 Feb 2015 Last revised: 29 Apr 2017

Amos Nadler

University of Western Ontario - Finance-Economics Area Group

Peiran Jiao

Maastricht University - Department of Finance

Cameron J. Johnson

Loma Linda University

Veronika Alexander

Claremont Colleges - Center for Neuroeconomics Studies

Paul J. Zak

Claremont Graduate University - Center for Neuroeconomics Studies

Date Written: April 27, 2017

Abstract

Growing evidence shows that biological factors affect individual financial decisions that could be reflected in financial markets. Testosterone, a chemical messenger especially influential in male physiology, has been shown to affect economic decision making, and is taken as a performance-enhancer among some financial professionals. This is the first experimental study to test how testosterone causally affects trading and prices. We exogenously elevated testosterone in male traders, and tested testosterone’s effect both on their trading behavior in experimental asset markets and on the size and duration of asset price bubbles. Using both aggregated and individual trading data, we find that testosterone administration generated larger and longer-lasting bubbles by causing high bids and the slow incorporation of the asset’s fundamental value.

Keywords: economics, testosterone, trading, finance, neuroeconomics, double auction markets, experimental finance

JEL Classification: C91, C92, E370, G02, D01, D03

Suggested Citation

Nadler, Amos and Jiao, Peiran and Johnson, Cameron J. and Alexander, Veronika and Zak, Paul J., The Bull of Wall Street: Experimental Analysis of Testosterone and Asset Trading (April 27, 2017). Available at SSRN: https://ssrn.com/abstract=2557094

Amos Nadler (Contact Author)

University of Western Ontario - Finance-Economics Area Group ( email )

London, Ontario N6A 5B8
Canada

Peiran Jiao

Maastricht University - Department of Finance ( email )

Maastricht, 6200 MD
Netherlands

Cameron Johnson

Loma Linda University ( email )

Loma Linda, CA 92350
United States

Veronika Alexander

Claremont Colleges - Center for Neuroeconomics Studies ( email )

160 E. 10th St.
Claremont, CA 91711-6165
United States

Paul Zak

Claremont Graduate University - Center for Neuroeconomics Studies ( email )

160 E. 10th St.
Claremont, CA 91711-6165
United States

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