T and Financial Risk

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Here is a nice follow-up to the Herbert and Coates study on London floor traders where they study the profitability of traders and testosterone levels. In this new paper, “Testosterone and Financial Risk Preferences”, available on the website on one of the authors, a Harvard-led team of researchers report that men with higher T make more financially risky decisions. They are careful to note that it is merely an association. But it is a start. The slam dunk paper that remains to be written is one with exogenous administration of testosterone (and placebo). That would hopefully settle the causality issue (and might therefore excite the imaginations of some economists!). There are some interesting ideas in the manuscript about financial-risk taking as a form of male-male competition.

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  1. …present events imply that this is a high risk high yield strategy. is the e(x) really that much greater than low T? there’s a reason variation remains in the population i suspect….

  2. This reminds me of a newspaper story I read a few years ago, I think it was early 2005, it was definitely before floor trading ended at the International Petroleum Exchange in London, since it was about a noisy enviromental protest on the trading floor. Understandly the disruptive protest angered the traders, who could no longer communicate what with the noise being made, so the enraged traders quite literally kicked the faeces out of the protestors. 
    Here we are. 
    What they were not prepared for was the post-prandial aggression of oil traders who kicked and punched them back on to the pavement.  
    ?We bit off more than we could chew. They were just Cockney barrow boy spivs. Total thugs,? one protester said, rubbing his bruised skull. ?I?ve never seen anyone less amenable to listening to our point of view.?  
    Traders definitely have a reputation for laddishness.