Men Probably Too Hormonal and Moody to be Trusted with Important Financial Decisions

[n2doc]

News from the world of science with some pretty grim implications for the global economy as it currently exists: men — rational, level-headed, decisionmaking men — aren't actually very well equipped to handle important financial decisions at all; it's like they're getting the male equivalent of their periods, but all the time. In fact, men are so beholden to their volatile hormones that their prominence in the world of finance may actually doom the whole system to inevitable, testosterone-fueled collapse.

A new book postulates that the nature of financial markets combined with the physiological effects of testosterone make for a veritable clusterfuck of overreaction, which ends up exaggerating both good and bad news and artificially prolonging both booms and busts. This conclusion is based on research that analyzed traders' spit during several market sessions which found that men working in the high-risk, high-reward setting of the world of finance experience hormone fluctuations that could seriously interfere with their ability to make good decisions. Per Bloomberg,

This simple fact should have big implications for how we think about markets. Market participants aren't the rational automatons of most financial theory. They are biological organisms responding with a neural and physiological apparatus designed millions of years ago. If what happens in markets affects hormones, these in turn alter behavior and feed back into the markets.

In other words, The Invisible Hand exists, but it can't come to the phone right now because it's on some powerful pain killers after it got mad and smashed through a plate glass window and needed like 50 stitches. And actually, it might be more accurate to refer to The Invisible Hand as The Invisible Testicles.

more

http://jezebel.com/5917383/men-probably-too-hormonal-and-moody-to-be-trusted-with-important-financial-decisions

[banned from Kos]

1. Nice parody! Right down to an Invisible Hand reference!

good stuff.

[DirkGently]

9. I don't think the book referenced is a parody.

Jezebel took a few extra jabs reporting it, is all. Sounds like the book and the Bloomberg article are stone sober:

Now at the University of Cambridge, Coates turned to neuroscience after working for a decade at Goldman Sachs Group Inc. and Deutsche Bank AG, where he ran a trading desk. Even before his experiments, his practical experience during the dot- com bubble convinced him that the markets were running on something deeper than dispassionate reason. Normally “a sober and prudent lot,” as he recalls, “traders were becoming by small steps euphoric and delusional.” They were “overconfident in their risk-taking, placing bets of ever-increasing size and ever worsening risk-reward trade-offs.” As much as traders and investors try to remain rational, will power is no match for steroids that work their effects in every single cell in the body.

http://www.bloomberg.com/news/2012-06-10/what-traders-testosterone-tells-us-about-markets.html

[banned from Kos]

11. I have seen many dopey male traders but the best are men

Soros, Chanos, Fink, etc.

[DirkGently]

13. But the boom- bust cycles when Alpha traders are set loose

suggests risky. Aggressive behavior out of control.

[Confusious]

22. More like egos out of control

Even aggressive people can see when they are going to loose.

Oh, and then there's just plain ol' fashion greed.

Which, in my experience, impacts both sexes equally.

[Zalatix]

25. Heresy! Greed only affects males, dammit. Let's ban testosterone!

[unreadierLizard]

2. I'm waiting for someone to take this seriously

to justify pushing an extreme agenda.

[Zalatix]

3. Oh, not again.

Countering flawed studies and assumptions about women with equally stupid ones about men.

I usually give a hearty side eye to any research that suggests that because of hormones, humans are utterly incapable of controlling themselves; it's just as ridiculous to believe that men can't make grown ass adult decisions to keep their animal instincts in check as it is to assume that women are chronically mentally unstable because MENSTRUATION. But it's refreshing, in a schadenfreude soaked taste-of-your-own-medicine sort of way, to see The Man in the crosshairs for his hormonal impulses rather than being exonerated by them.

If I said "how about we nuke the menstruation jokes and jokes about female emotions instead of engaging in crap like this" would that somehow be taken as misogynistic?

[BlancheSplanchnik]

4. I do understand your point, *but*

you knew the big B was coming, right?


But taking a strategy of non-engagement, keeping silent, turning the other cheek....women have done that for centuries. How'd that work for us?

Things didn't start changing until women/people started countering the hatred.

Satire is a form of speaking out.

[Zalatix]

6. I'm not sure how this is going to help. It's divisive.

And before anyone accuses me of being one-sided, I've never seen anyone post how women's emotions are holding them back.

I don't propose non-engagement. I propose driving people into exile who make the comments about women that precipitated this particular satire. Lawrence Summers, for instance, should have been disgraced permanently for his sexist Harvard schtick about women in STEM.

[DirkGently]

10. I really don't think this is satire.

Jezebel is making funny over a Bloomberg report. Bloomberg's not known for Onion-esque pieces. It's based on several studies and a recent book by a neuroscientist.

Coates makes a convincing case that physiology plays a central role in driving markets, one that is generally overlooked. This insight might well form the basis of new investment indexes, even funds, based on widespread real-time monitoring of the hormonal biochemistry of the investing population.

What's more, I don't think it's the least ridiculous or extreme. Doesn't take a neuroscientist to observe that obsessive, aggressive risk-taking is a by-product of testosterone.

I'm a little surprised to see people leaping in and assuming it's a joke.

[nashville_brook]

20. i'm not at all convinced this is a flawed study coming out of Cambridge.

Seems to me to be quantifiable and quantified to the max. examining financial outcomes vis a vis hormonal fluctuations is brilliant b/c values are attached at both ends -- you can measure both chemicals and work performance (in dollars/pounds/etc). pretty cool.

Little is known about the role of the endocrine system in financial risk taking. Here, we report the findings of a study in which we sampled, under real working conditions, endogenous steroids from a group of male traders in the City of London. We found that a trader’s morning testosterone level predicts his day’s profitability. We also found that a trader’s cortisol rises with both the variance of his trading results and the volatility of the market. Our results suggest that higher testosterone may contribute to eco- nomic return, whereas cortisol is increased by risk. Our results point to a further possibility: testosterone and cortisol are known to have cognitive and behavioral effects, so if the acutely elevated steroids we observed were to persist or increase as volatility rises, they may shift risk preferences and even affect a trader’s ability to engage in rational choice.

[Ashley96]

5. Spam deleted by gkhouston (MIR Team)

[dionysus]

7. hooooboy...

[freshwest]

8. Bwahaha! What detail. Jezebel is pretty good.

[DirkGently]

12. Doesn't appear to be a joke.

Jezebel is adding some sauce, but the referenced sources are not satire. Here's a study. Not super jokey, near as I can tell.

http://www.pnas.org/content/105/16/6167.full.pdf

[freshwest]

14. Yes, Dirk.

[DirkGently]

19. Yes, freshwest.

[freshwest]

23. And here's to you...

[Comrade_McKenzie]

15. ...in the hands of their significant other. nt

[Overseas]

16. K&R. I agree.

[ManyShadesOf]

17. these ball-fueled bozos

in "financial markets combined with the physiological effects of testosterone make for a veritable clusterfuck of overreaction" are totally fucked and answering to the actual "rational automatons of most financial theory" -- COMPUTERS!! TALKING TO EACH OTHER. FUCKING OVER JAPAN. ETC. FUCK YEAH! SNAFU.

&feature=related

[ljm2002]

18. Or as a friend of mine used to say...

..."PMS is that time of the month when women act the same way men act all the time." (just for the record, the friend was a man).

It is interesting to note that it was often women, rather than men, who blew the whistle on financial wrongdoing, or who tried to apply the brakes to financial overreaching. Examples: Sherron Watkins, the first one to expose the financial shenanigans at Enron; and Brooksley Born, whose attempts to regulate swaps were simply rejected by the likes of Alan Greenspan, Robert Rubin and Larry Summers. There was a lot of discussion about the Iceland situation, and how it was largely fueled by male bankers and traders. They have reacted by giving more women the reins in banking and in politics, with good results.

Also, there are studies showing that women tend to be better investors, while men tend to be paid more for their efforts in the investment world, even though they don't do as well as their female counterparts. Ah, well, what else is new.

[Skittles]

21. CORRECT

[BlueIris]

26. Heh.

Good points.

[iandhr]

24. love it

[Lucky Luciano]

27. Try posting the same title with "Women too hormonal..."

Then check the reaction.

[just1voice]

28. So I guess all men should be castrated in the author's mind

Too bad human beings and made up of chemicals and things, that darn science!

[nashville_brook]

29. my takeaway is that financial decisions fueled by testosterone = fail

your man bags are safe.


for now.