Financial Risk-Taking Linked to Testosterone
Traders crowd the post that handles Morgan Stanley on the floor of the New York Stock Exchange near the close of trading, Wednesday Sept. 17, 2008. The Dow Jones industrial average dropped about 450 points.
Credit: AP Photo/Richard Drew

There's a biological barometer for the type who might invest in the high-risk loans, derivatives and hedge funds that have brought our nation's financial advisors to their knees.

Guys with higher testosterone levels along with manly faces are more likely to take the biggest financial risks, suggests a new study.

"Although our findings do not address causality, we believe that testosterone may influence how individuals make risky financial decisions," said researcher Coren Apicella, an anthropologist at Harvard University.

Previous studies have shown that on average, men are more likely than women to take risks, and the researchers theorized that these differences could be explained by the role of testosterone.

A recent study also showed that stock market traders made more money on days when their testosterone levels were highest.

The new study, detailed online in the journal Evolution and Human Behavior, is the first study to directly examine the relationship between testosterone and financial risk-taking, the researchers say.

Money game

Apicella and Anna Dreber of Harvard and the Stockholm School of Economics, along with colleagues, analyzed spit samples taken from nearly 100 guys, ages 18 to 23, who were mostly Harvard students. The samples were collected before students played an investment game, so the researchers were certain that testosterone levels were not elevated as a result of the game.

In the game, participants were given $250 and had to invest some amount up to that total. They kept the money not invested.

A coin toss determined the investment's outcome, so if the participant lost the toss he also lost his invested money. If he won the coin toss, he snagged two and a half times the invested amount. At the end of the game, one person was selected by lottery to receive the cash amount of their investment, which created a monetary incentive for the participants.

Guys whose testosterone levels were greater than the average, beyond normal variation, invested 12 percent more in the risky investment than the average-testosterone participants. The researchers also scored players on facial masculinity. Those who had the manliest faces invested 6 percent more than their average-face counterparts.

Biological payoff

The findings may help to explain the biological foundation of why some people are more inclined toward risk-taking than others. Perhaps the wheelers and dealers on Wall Street are just playing their parts in the game of evolution.

"Financial risk might be comparable to other risky male behaviors associated with reproduction," Apicella said. "Men may be more willing to take financial risks because the payoffs, in terms of attracting mates, could be higher for them."

Basically, if the risk does pay off financially, it could also pay off with the ladies.

She added, "This is because women value wealth more than men when choosing for a mate."

The research was funded by the Jan Wallander and Tom Hedelius Foundation.