What If Women Ran Wall Street?: Testosterone & Risk
According to a new breed of researchers from the field of behavioral finance, Wall Street’s volatility is really driven by our body chemistry. It’s the chemicals pulsing through traders’ veins that propel them to place insane bets and enable bank executives to make risky decisions—and those same chemicals tend to have the same effect on everyone, turning them into a herd of overheated animals. And because the vast majority of these traders and finance executives are men, the most important chemical in question is testosterone.
Anna Dreber, an economics researcher at Harvard’s Kennedy School, started studying testosterone as a possible explanation for why there tend to be few women in certain fields—math, say, or kickboxing. Through studies conducted at the Harvard biological-anthropology department, Dreber found that appetite for risk in simulated investment games correlated with high testosterone levels and with facial characteristics such as sharp cheekbones and strong jaws that are normally associated with the hormone. “There is a clear sign that something biological explains risk taking,” she says. Testosterone is not the only chemical that affects it—the stress hormone cortisol has a role, as well as the neurotransmitter dopamine, among others—but it’s by far the most powerful.