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BGU study: High testosterone levels cause men to take exaggerated risk

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March 2, 2017 01:35

They published their study in the March issue of Journal of Economic Behavior & Organization.

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Men apparently take more exaggerated risks than women in finance and business because of their higher levels of testosterone, according to new research on “psychological momentum” done at Ben-Gurion University of the Negev in Beersheba.

Psychological momentum is defined as a state-of-mind in which individuals or teams feel things are going unstoppably their way.



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Dr. Danny Cohen-Zada, a lecturer in the BGU department of economics, along with his colleagues, published their study in the March issue of Journal of Economic Behavior & Organization.

“The purpose of our study was twofold: to estimate the causal effect of psychological momentum on performance in real tournament settings and to examine whether there are any gender differences in the corresponding response,” he explained.

The study suggests that, while more research is needed, if more women – with less psychological momentum – entered the male-dominated professions of stockbrokers, high-profile managers, politicians and military commanders, those professions would become more stable and involve less exaggerated risk.

The researchers analyzed two samples of men’s and women’s judo competitions from 2009 to 2013. In the first, they looked at the bronze medal fights of each tournament. While those competitors won the same total number of bouts, some had won their most recent bout while others had not. Those who reached the bronze medal fight following a win had a potential momentum advantage.

The authors examined this unique setting to determine whether the contestants with the momentum advantage had a higher probability of winning.

“Our results showed that based on a cross-section analysis of 106 men’s and 111 women’s fights from eight major annual judo events, having a psychological momentum advantage significantly increases the probability of winning in men’s contests but not in women’s,” said Dr. Alex Krumer of the Swiss Institute for Empirical Economic Research at the University of St. Gallen.

The study’s second part was based on the head-to-head history of the pairs from the first sample, analyzing 225 men’s and 231 women’s fights. The researchers obtained similar results by analyzing how the performance of the same pair of judokas were affected by varied momentum statuses in different tournaments. As expected, the results of these specifications indicated that the effect of psychological momentum exists for men, but not for women.

The researchers believe there are implications for business in their findings. “We can connect our findings to the effect of psychological momentum in financial markets, where 90% of traders are men,” said Dr. Ze’ev Shtudiner, from the department of economics and business administration at Ariel University. (Krumer and Shtudiner earned their PhDs from BGU.) “Such an effect may lead male traders, driven by an increase in testosterone due to a successful investment, to take exaggerated risks, which, in turn, create price bubbles,” said Shtudiner. “By increasing the number of women traders in financial markets, it may be possible to stabilize these markets since women have less dramatic shifts in testosterone levels, which can make them less prone to the momentum effect. This argument is consistent with our results that momentum effects are generated only among men, since it is only among them that testosterone levels increase after success.”

Krumer added that psychological momentum can be used positively.

“An increased frequency of positive feedback from managers after successful actions may turn into a positive psychological momentum and thus increase productivity,” he said. “Similarly, managers should exert efforts to reduce the influence of unsuccessful actions of their workers to avoid productivity losses.”
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