Last Updated Apr 16, 2008 4:32 PM EDT
- The Find: Recent research finds that male hormones might help explain the risk-taking behavior that underlies market bubbles and crashes
- The Source: Research from the University of Cambridge in this week's edition of Proceedings of the National Academy of Sciences.
Taken together the two hormones could help explain the excessive risk taking of bubbles (successful bets lead to more testosterone, which leads to more risk taking) and the the panicked fleeing towards the door after crashes. (Doped-up on cortisol after repeated set-backs, traders are unable to stomach even slight risk, no matter how much central banks lower interest rates).
Managers are not endocrinologists, but the study is a reminder to guys to be skeptical of claims that emotions play no role in your thinking. Acknowledging the impact of emotional cues on decision making is the first step towards correcting for them. Or you could just hire more women.