Would you invest in testosterone?

in life •  last month

No, I am not talking about a new anti-feminist cryptocoin. This is about the original stuff, the „male“ hormone.

If you have invested any money in an actively managed fund, then chances are you already have invested in testosterone. Most funds, and especially the “dynamic” day trading ones, are managed by more or less young males in steam-ironed white shirts and stern looks. Yes, they train those things.


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But is that a good idea? After all, the world’s most famous stock trader Warren Buffet may be male, but he certainly isn’t young, and even when young he didn’t exactly did “young male” stuff.

Still, especially at the stock trading, young is still “in”. But not only the lacking experience may have an adverse effect on the results. The testosterone itself has.

In a study “The Bull of Wall Street: Experimental Analysis of Testosterone and Asset Trading” researchers put the trading bulls to the test. They got an extra dose of testosterone, the control group a placebo. Then the groups traded on a simulated market.


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Result: Testosterone has a big effect on how the young men traded.

The authors found that among groups that received testosterone relative to those who received a placebo, larger price bubbles formed, mispricing lasted longer, market dynamics changed to reflect increasing bidding and selling volume, and their perception of a stock's value changed despite its being displayed throughout the study. While the traders who received the placebo displayed "buy low to sell high" behavior, those who had received testosterone adhered to "buy high to sell higher."

That also means that the “invisible hand of the market” is often absent when it plays between the legs, which could explain why nobody stopped buying e.g. in the subprime crisis even when the traders themselves admitted that prices were ridiculous. Buy high to sell higher, the typical bubble thinking.

But since high levels of testosterone also prevent learning, I guess nothing will change in the next crash. Or what do you think?

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