Cortisol and testosterone increase financial risk taking and may destabilize markets

Carlos Cueva, R. Edward Roberts, Tom Spencer, Nisha Rani, Michelle Tempest, Philippe N. Tobler, Joe Herbert, Aldo Rustichini

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79 Scopus citations


It is widely known that financial markets can become dangerously unstable, yet it is unclear why. Recent research has highlighted the possibility that endogenous hormones, in particular testosterone and cortisol, may critically influence traders' financial decision making. Here we show that cortisol, a hormone that modulates the response to physical or psychological stress, predicts instability in financial markets. Specifically, we recorded salivary levels of cortisol and testosterone in people participating in an experimental asset market (N=142) and found that individual and aggregate levels of endogenous cortisol predict subsequent risk-taking and price instability. We then administered either cortisol (single oral dose of 100mg hydrocortisone, N=34) or testosterone (three doses of 10g transdermal 1% testosterone gel over 48hours, N=41) to young males before they played an asset trading game. We found that both cortisol and testosterone shifted investment towards riskier assets. Cortisol appears to affect risk preferences directly, whereas testosterone operates by inducing increased optimism about future price changes. Our results suggest that changes in both cortisol and testosterone could play a destabilizing role in financial markets through increased risk taking behaviour, acting via different behavioural pathways.

Original languageEnglish (US)
Article number11206
JournalScientific reports
StatePublished - Jul 2 2015

Bibliographical note

Funding Information:
This work was supported by the Economic and Social Research Council (grant ES/G005230/1). CC was supported by the Spanish Ministerio de Economía y Competitividad (ECO2012-34928). PNT was supported by the Swiss National Science Foundation (PP00P1_128574 PP00P1_150739 and CRSII3_141965). RER was supported by the UK Medical Research Council (Mr/J004685/1). We also thank Paul Fletcher, Emilio Fernandez-Egea, Ashley Grossman, Helen Gossage and Sheila Skidmore for their help during the project.


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