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‘Cortisol is likely  to rise in a market crash and, by increasing risk aversion, to exaggerate the market’s downward movement.’

I listened last night to an interview with Dr John Coates, a former Wall Street trader and the lead author of research published in April by the Judge Business School in Cambridge, analysing the impact of hormone levels (testosterone and cortisol) on traders performance and their ability to make judgements.

Coates goes on to say in the interview:

‘Cortisol, if you’re exposed to it chronically at high levels for a long period of time, it can have a devastating effect on both the mind and the body. In terms of affecting traders decisions what it can do is affect the memories you recall. You tend to recall bad memories, negative precedents. You tend to see risk where maybe there is none. You become fearful, you feel anxiety. I think that decreases a trader’s appetite for risk. While testosterone is causing people to take too much risk cortisol is causing people to take too little risk in the crash.’

I had also earlier read Tim Prices excellent weekly commentary  ‘Diamonds amongst rubble’ suggesting that the [orchestrated?] inducement of large amounts of fear in all of us was necessary to get the financial rescue packages that the banks were looking for.

So are we all now dithering in overdoses of Cortisol induced by fear?

Can we no longer make rational decisions?

How long does it take to wear off?

Has the ‘market’s downward movement’ already been exaggerated?

People react in different ways to fear. Maybe we should worry less about the fear and more about balancing fear with opportunity.


Judge Business School Press Release: ‘Testosterone levels predict City traders’ profitability. Research provides insight into irrational decision-making during crashes and bubbles.’

The Naked Scientist: Hormones and the Money Markets (access to interview transcript and podcast). 

Tim Prices Blog: The Price of Everything.

Getting in touch with your feminine side: An interesting blog article discussing allegations of hormone management amongst traders at SAC Capital.

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August 2022