Men who want to know if they’d make it as day traders on Wall Street just have to look down at the fingers, according to a new study. The longer their ring fingers are in relation to their pointer fingers, the more likely they are to have what it takes to make millions on the trading floor. Previous research has found that the digit ratio reflects how much testosterone an unborn baby was exposed to in the womb. Those exposed to high levels of the hormone are more sensitive as adults to testosterone that creates feelings of confidence and encourages risk-taking, said study author John Coates [Bloomberg].
Coates has previously shown that traders who register the highest levels of testosterone in the morning make the most money through the course of the day, and this new study adds to the earlier work by suggesting that their advantage may have been innate, not learned. Although it may come as no surprise that testosterone could be a big player in the mano-a-mano world of Wall Street, the research offers the best evidence yet of the hormone’s role in determining which would-be Masters of the Universe will thrive. It also supports the growing recognition that biology plays a role in complex human behaviors, and that financial choices in particular are often less rational than economists appreciated [Washington Post].
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As the turmoil continues in the world’s financial systems and countries brace for an economic downturn, many environmentalists and green tech entrepreneurs are posing the question: How will this crisis impact the young renewable energy sector?
Some worry that ambitious projects won’t be able to get the financing they need from troubled banks wary of lending money, while others note that oil prices have dropped fast based on predictions of lower demand. Advocates are concerned that if the prices for oil and gas keep falling, the incentive for utilities and consumers to buy expensive renewable energy will shrink. That is what happened in the 1980s when a decade of advances for alternative energy collapsed amid falling prices for conventional fuels [The New York Times].
In Europe, environmental ministers are meeting to finalize the European Union’s goals for cutting the greenhouse gas emissions that cause global warming, but new discord has broken out. Nations like Italy and Poland have begun to argue that emission cuts must be scaled back to avoid further hardship for industry during the hard economic times. Italian Prime Minister Silvio Berlusconi said: “Our businesses are in absolutely no position at the moment to absorb the costs of the regulations that have been proposed” [BBC News].
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In a finding that has particular relevance right now, as the American public looks for scapegoats for the current financial crisis, a new study has found that men with higher levels of testosterone are inclined to make riskier financial decisions. Just how much riskier? Those with 33 percent more testosterone than average men invested 10 percent more of their dough. The findings are based on saliva samples from 98 male Harvard students taken before they played an investment game with $250 in real money [Scientific American].
Researchers say they didn’t outright prove that it was Wall Street men’s hormones that got us into this mess, but that the evidence is strongly suggestive. “Although our findings do not address causality, we believe that testosterone may influence how individuals make risky financial decisions,” said researcher Coren Apicella…. A recent study also showed that stock market traders made more money on days when their testosterone levels were highest [LiveScience].
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Ever wondered what causes the spate of wild bidding in the last few minutes of an Ebay auction? Scientists say they now have answer: The irrational behavior is caused by people’s fear of losing, not their desire to win. While economists have recognized the concept of “loss aversion” for some time, a new set of experiments used brain scans and lab experiments to show how strongly the phenomenon plays out in auctions, and how it’s tied to overbidding.
In the first experiment, test subjects participated in either a lottery or an auction. During the games, scientists watched the responses of the subjects’ striata—the brain’s reward center—using functional magnetic resonance imaging (fMRI). The elation of winning was the same in both games, but the agony of defeat was crushing for losers of the auction. After auction, brain activity in the loser’s reward centers decreased substantially. But it hardly blipped when the person lost a lottery [Ars Technica]. What’s more, auction losers who had the steepest declines in striata activity were more likely to have overbid during the auction.
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