Bubbles and Testosterone

Moana Vercoe, post-doctoral fellow at the Center for Neuroconomics Studies; Paul J. Zak, Founding Director of the Center for Neuroeconomics Studies and Professor of Economics, Psychology and Management, Claremont Graduate University
The vast majority of trades on the NYST are made by male institutional traders. In part this research has been designed to study the role testosterone might play in asset market bubbles, the kind of bubbles for which the sources are not clearly understood. This study combines elements of two studies previously conducted at the Center for Neuroeconomics Studies: one examining the role of testosterone in decision making in the trust, ultimatum and dictator games, and the other based on an experimental asset. It aims to test the effects of testosterone on the formation of asset bubbles (deviations from fundamental price) in a laboratory asset trading experiment. This study will be the first to directly manipulate testosterone levels in males and to relate this causally to asset prices, and may shed light in determining how testosterone influences risk taking and confidence in individuals.