The market, they say, can be irrational in the short term, but is rational in the long term.
In addition, a common reason for a swing in the fortunes of traders and companies on a given day, whether in a wide, walled street in New York or in a once-bombed-out but rebuilt stock exchange in the Marathis-only city of Mumbai, is a phenomenon called ‘sentiment‘.
Now, one might have wondered, why is ‘sentiment’ an issue in the cut-and-dried world of shares and commodities, where only the most hardened traders survive?
The answer is now here.
According the New Scientist:
Research from the University of Cambridge suggests that the movements of money in the financial markets are correlated to stock traders’ levels of two hormones: the steroids testosterone and cortisol.
…when the traders made more money, they had elevated levels of testosterone. When the markets were particularly variable, they had elevated levels of cortisol.
As the testosterone levels increased, so did the success of the traders. Till a point.
There is a point of diminishing returns; too much testosterone leads to too much aggression and reckless decision making.
So, now we know why the stock market behaves like a woman with PMS. And why horny men end up blowing a lot of money. In stocks and stockings.