Why high-frequency traders are like rutting stags

“They were displaying classic symptoms of mania. They were overconfident, they had racing thoughts, they had diminished need for sleep and heightened sexual appetite.”

John Coates, a former Wall Street trading floor manager, was describing to me not drug addicts or rutting stags, but the male traders he had supervised during the dotcom bubble.

The similarities are not just skin deep. Successful traders and dominant stags are indeed high on something: testosterone. Spikes in testosterone levels are both the cause and the consequence of a profitable day on the trading floor. After a good day, traders find their systems flooded with testosterone, which encourages them to take more risks the following day and, up to a point, to make more money.

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Tim Harford’s blog

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Tim, also known as the Undercover Economist, writes about the economics of everyday life.