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Testosterone To Blame for Market Madness?

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Meet the newest contestant in the blame game.

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The collapse of financial titans like American International Group (AIG), Lehman Brothers, Wachovia (WB), and Merrill Lynch (MER) has everyone asking the same question - who let this happen? Whether the fingers are pointed at Alan Greenspan, Henry Paulson or greedy lenders, when it comes to playing the blame game, everyone's got a theory.

But according to an article in Scientific American, the real culprit may be something entirely different: testosterone.

A recent study from Harvard University found that men with higher amounts of testosterone make riskier investments than men with lower levels. Could high levels of the hormone in CEOs have played a role in the current crisis? Anna Dreber, a co-author of the study, weighs in:

"Long-term, above-average testosterone levels may perhaps eventually lead to irrational risk-taking, and thus lower profits," Dreber said. "This is maybe what we see today."

Dreber's study was based on saliva samples from 98 Harvard students who were given $250 with which to invest. Results showed that men who had more masculine features invested 6% more of their money than their less masculine peers.

When men lose a competition (or money, for that matter), the amount of testosterone in their bodies decreases. Dreber says this could have played a roll in Monday's 777-point drop in the Dow.

"People have been losing and their testosterone levels may have decreased, and therefore, they are more risk averse," Dreber said.

Does this mean investors should be running out to their doctors for testosterone injections? Probably not. Side effects may include oily skin, acne and unfounded aggression. In times like these, staying cool may be more important that looking strong.

For more on how testosterone is the silent mover of the markets, check out Hoofy and Boo's always astute report.



No positions in stocks mentioned.

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