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Trading on Testosterone: Doping and the Financial Markets

Two cambridge researchers have found that  found that the amount of money a male financial trader makes in a day is correlated with his testosterone level. The pair – John Coates and Joe Herbert – also found that a trader’s testosterone at the beginning of a day is strongly predictive of his success that day, suggesting that testosterone causes improved stock market performance, rather than the reverse.

These results, published this week in the Proceedings of the National Academy of Sciences, should be interpreted with caution, since there are many possible confounding factors. There may be some other psychological, hormonal or neural state that causes both elevated testosterone and improved trading performance. It’s possible, for example, that elevated testosterone on one morning is caused by good performance the day before, which may simply reflect that the trader has accurate beliefs about the current state of the market – beliefs which might cause him to also trade well the following day.

The benefits of testosterone might also depend significantly on the state of the markets. It seems likely that, if testosterone does improve performance, it does so by reducing risk aversion. Low risk aversion may be desirable during bull markets, when stocks are generally rising. But it may be less desirable or even harmful in bear markets, when stocks are generally falling.

But suppose further work shows high levels of testosterone do improve trader performance, in both bull and bear markets. There is already one other area in which testosterone is known to improve performance – sport – and in that area, it has been much used as a performance enhancer. Will testosterone doping also occur on Wall Street or in the Bourse?

Of course, taking testosterone can have many side effects, and not everyone would be prepared to tolerate these. Professional sportspeople appear to be unusually ambitious, and more prepared than most of us to take great risks with their health. But surely, if there is any other group that shares these characteristics, it is stock traders. We should not assume that traders would refrain from doping out of risk aversion, especially if doping were legal.

Would there, then, be a case for banning trader doping? In one way, doping on the stock market would be less troubling than doping in sport. I’ve argued elsewhere that sport is unusual in that we value it largely as a test of certain human attributes such as effort and innate ability. Doping, at least when undergone by some athletes but not others, may interfere with a sport’s ability to test those characteristics. But we do not value the stock market as a test of traders’ effort or abilities. We value it as a means of efficiently distributing capital across companies. If trader doping would improve the efficiency of the market, there would be a strong case for allowing it, considering the massive social benefits that a more efficient stock market could have.

There are, however, arguments militating in the opposite direction. There is a big leap from the finding that testosterone can improve the performance of individual traders within a single day to the suggestion that unregulated testosterone use would improve the overall performance of the stock market.

First, it may be that testosterone is a positional good for traders, meaning that it improves performance only to the extent that one has more of it than others. In that case, if everyone took testosterone, there would be no improvement in individual (and therefore, presumably, market) performance. There might develop a kind of arms race in which each trader tries to out-testosterone the others, but because everyone else is doing the same, no-one ends up with better performance, and everyone has to tolerate testosterone side effects.

Second, the benefits of elevated testosterone for traders may limited to the short term. As Coates and Herbert note, there is some evidence from other studies that prolonged elevation in testosterone levels leads to impulsivity, sensation seeking, and harmful risk taking, which we might expect to impair trading performance.

This second point is particularly important in assessing the benefits of financial markets from a social point of view. The social benefits of financial markets are undermined when those markets are highly unstable, and trader impulsivity and sensation seeking are precisely the sorts of traits that might be expected to contribute to market volatility. Testosterone may thus, Coates and Herbert speculate, be part of what drives the boom phase of boom-bust cycles. Perhaps, then, it would be better if traders reduced their levels of testosterone. Or perhaps, as Coates suggests, trading firms should simply hire more women.


Coates JM, Herbert J. ‘Endogenous steroids and financial risk taking on a London trading floor’, PNAS 14 April 2008;104(16):6167-6172.

Palmer J. ‘Traders’ raging hormones cause stock market swings’, New Scientist, 14 April 2008.

Douglas TM. ‘Enhancement in Sport, and Enhancement outside Sport’, Studies in Ethics, Law, and Technology 2007;1(1): Article 2.

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1 Comment on this post

  1. Or perhaps this might be the basis for the next Fed intervention? If current economic problems are, as some say, due to a ‘lack of confidence’ this would seem to offer a great deal of hope. Of course, further research is necessary.

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