Earlier this year, the financial community snickered at court filings by SAC Capital trader Andrew Tong alleging that his bosses at the hedge fund forced him to take estrogen pills to become "feminine" and dress in "certain kinds of clothing." Until that point, everyone thought the whole point of being a stock trader or a hedge fund manager was to let one's most testosterone-addled instincts run amok and do things that "normal" people consider stupid like, say, buying or selling securities backed by subprime loans that aren't properly vetted by mortgage brokers encouraging people to file fraudulent applications in order to qualify for more money than they can afford to pay back with interest rates set to adjust up after a year! (Deep breath.)Well, it actually turns out that science backs up the premise that the testosterone-addled among us do make riskier financial decisions! A new study of 98 Harvard students published yesterday in Evolution and Human Behavior shows that men with higher levels of testosterone invested more of their money than those with lower levels. This jibes with earlier studies that show actual traders "make more money" on days when their testosterone levels are higher and that even women make riskier financial decisions while menstruating — when estrogen and progesterone are lower in proportion to naturally occurring testosterone. (Wait, does that mean that testosterone can be blamed for PMS? Because that would be kind of cool.) Anna Dreber, the co-author of the Harvard study, says, "Long-term, above-average testosterone levels may perhaps eventually lead to irrational risk-taking, and thus lower profits." So, maybe there was a method to the SAC Capital estrogen-popping madness? Could a hedge fund really have been trying to maximize long term profits? That might be even stranger than a hedge fund forcing its traders to cross-dress. Is Testosterone To Blame For The Financial Crisis? [LA Times]
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