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The Role of Hormones in Financial Markets

39 Pages Posted: 8 Mar 2016  

Subir Bose

University of Leicester - Department of Economics

Daniel Ladley

University of Leicester - Department of Economics; University of Leicester - Institute of Finance

Xin Li

University of Westminster´╝îWestminster Business School

Date Written: March 7, 2016

Abstract

Steroid hormones, such as testosterone, have been shown to affect risk preferences in humans with high levels leading to excessive risk-taking. Hormone levels, in turn, are affected by trading outcomes as well as by gender -- males are more sensitive to stimuli than females. We investigate the effects of hormones on market behavior and trader performance. An increase in the proportion of female traders does not necessarily make markets less volatile; however, it reduces the occurrence of market crashes. Male traders on average under-perform females, although the best performing individuals are more likely to be male.

Keywords: Gender, Hormones, Endogenous risk preference, Market stability, Trader performance

JEL Classification: G10, G02, D02

Suggested Citation

Bose, Subir and Ladley, Daniel and Li, Xin, The Role of Hormones in Financial Markets (March 7, 2016). Available at SSRN: https://ssrn.com/abstract=2743087 or http://dx.doi.org/10.2139/ssrn.2743087

Subir Bose

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

Daniel Ladley (Contact Author)

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester, LE1 7RH
United Kingdom

University of Leicester - Institute of Finance ( email )

Astley Clarke Building
University of Leicester
Leicester, Leicestershire LE17RH
United Kingdom

Xin Li

University of Westminster´╝îWestminster Business School ( email )

35 Marylebone Road
London NW1 5LS
United Kingdom

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