Alan Greenspan and Robert Shiller used the phrase "irrational exuberance" to describe an underlying reason for inflated stock markets. Now researchers think they may have found out why this may be happening: traders' hormones.  If you know anything about the complexity of the global financial markets, the notion that hormones may be able to influence the ebb and flow of money on stock exchanges may seem a reach. But a new study published Thursday in Scientific Reports shows such a connection.  Researchers simulated a trading floor in a lab by having 142 volunteers buy and sell assets. They showed that individual levels and group levels of cortisol (a steroid hormone that comes from the adrenal gland and is elevated in response to physical or psychological stress) predicted subsequent risk-taking and price instability.  Then they broke out the young males in the group and gave 34 of them cortisol and 41 of them testosterone (secreted primarily by the testicles of males) and found that both groups tended to invest in riskier assets.  "Numerous reasons have been proposed to explain why financial markets undergo periods of instability. These include: debt accumulation, incorrect beliefs about earnings process, limits to arbitrage, asset incompleteness, herding, or momentum trading," they wrote. "Yet influential economists still recognize the key role played by the unpredictability of human motivation."  The researchers, led by Carlos Cueva from the department of economics at the University of Alicante and Ed Roberts from Imperial College of London, said that cortisol appears to affect risk directly, while testosterone appears to increase optimism about future price changes.  "Our view is that hormonal changes can help us understand traders' behavior, particularly during periods of financial instability," Cueva said in a statement.  The researchers wondered: "If altered levels of either hormone were to affect the appetite for financial risk, could this in turn destabilize the market as a whole?" They wrote that it's not clear whether the results of their study can be generalized but that it's an issue that calls for more in-depth study and should be considered by policymakers concerned about the stability of markets.  This is what drinking too much water during exercise does to your body  Theranos blood test: The insanely influential Stanford professor who called the company out on its 'stealth research'  Diabetes drugs' happy side effect: Weight loss  Ariana Eunjung Cha is a national reporter. She has previously served as the Post's bureau chief in Shanghai and San Francisco, and as a correspondent in Baghdad.
It may sound far-fetched but researchers have highlighted that hormones, particularly testosterone and cortisol, may influence their decision making.