The Hour Between Dog and Wolf: Risk-Taking, GutFeelings and the Biology of Boom and Bust. By JohnCoates.
狗和狼之间的那一刻:冒险、 直觉和繁荣与萧条的生物学。由约翰•科茨。
The financial crisis was caused by many things: greedy bankers, a glut of Chinese savings, shoddyregulation, an obsession with home ownership—take your pick. John Coates, once a trader onWall Street and now a neuroscientist at Cambridge University, presents yet another culprit: biology,or, more precisely, the physiology of risk-taking. Financial traders, he says, are influenced by whatis going on in their bodies as well as in the markets. Two steroid hormones—testosterone andcortisol—come out in force during the excesses of bull and bear markets.
Testosterone, “the molecule of irrational exuberance”, is released into the body during momentsof competition, risk-taking and triumph. In animals this leads to something called the “winnereffect”. A male that wins one battle goes into the next one primed with higher levels oftestosterone, helping him to win again. Eventually, though, confidence becomes cockiness. Theanimal starts more fights and experiences higher rates of mortality.
Mr Coates thinks the exuberance that turns a market rally into a bubble may be fuelled by thesame chemical. Some of this is based on traders he knew who became ever more convinced oftheir own invincibility during the dotcom era. But he also offers harder evidence. In one experimentMr Coates sampled testosterone levels in traders in London and found that higher levels of thehormone in the morning correlated with beefier profits in the afternoon. Such profits came fromtaking higher risks, not greater skill.
Biology may also be responsible for worsening market sentiment in bad times. The body’sresponse to prolonged periods of stress is to secrete increasing amounts of cortisol, a hormonethat marshals resources to cope with crises. Sure enough, Mr Coates finds that cortisol levels intraders’ bodies fluctuate in line with market volatility, even displaying a striking correlation withthe prices of derivatives.
A burst of chemicals can be helpful. Good traders seem to produce a lot of hormones, but only forshort periods of time. The trouble comes when cortisol remains in the body for extended periods.Rational analysis becomes harder, allowing emotional responses to gain the upper hand; riskaversion grows as testosterone production is suppressed. “During a severe bear market,” writesMr Coates, “the banking and investment community may rapidly develop into a clinicalpopulation.”
One answer, he thinks, is to change the chemical make-up of trading floors by hiring more oldermen and, especially, women. Their bodies release far less testosterone. Women have the samelevels of cortisol as men, but their stress response is triggered less by competitive failures andmore by problems in their personal lives. That may make them more resilient when the marketsturn against them.
Mr Coates’s thesis is not entirely convincing. The experimental data are too scarce and thedistinction he draws between the masculine world of risk-taking traders and the more feminisedworld of asset managers skips over the fact that many supposedly cautious, long-term investorsmade poor bets in the boom. But it makes intuitive sense that biological responses inform themood of the markets. This book puts flesh on that idea.