According to a study, naturally produced steroids in the body, especially cortisol and testosterone, has the positive effect of influencing performance of city traders to a significant extent.
It was noted that high morning testosterone levels may help traders to earn more than just average profits, as per a research conducted at the University of Cambridge.
It was hypothesized that this performance improvement can be because testosterone is acclaimed for improving the appetite for confidence and risk - factors that can easily augment performance of financial traders.
From News-Medical.Net:
The researchers also speculated that if testosterone continued to rise or became chronically elevated, it could begin to have the opposite effect on a trader's profitability by increasing risk-taking to unprofitable levels. Previous studies have shown that administered testosterone can lead to irrational decision-making. They believe that this is because testosterone has also been found to lead to impulsivity and sensation seeking, to harmful risk taking, and in extreme cases (among users of anabolic steroids) to euphoria and mania.
Testosterone may therefore underlie a secondary consequence of the ‘winner effect' in which a previous win in the markets leads to increased, and eventually irrational, risk taking in the next round of trading.
It was also noted that this finding can also help in ascertaining how and why people caught in crashes often find it tedious to make a rational decision.
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