Testosterone-pumped ‘Wolf of Wall Street’-style traders are more likely to lose money

In Hollywood films such as the Wolf of Wall Street, traders like to think of themselves as rogue males – edgy, aggressive and good at taking risks.

But a study has found that high testosterone levels actually make traders more likely to produce lower returns, take unnecessary risks and commit fraud.

Researchers analysed the facial width-to-height ratio (people with ‘wide’ or ‘square’ faces have higher testosterone levels) of 3,228 male hedge fund managers.

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Hedge fund traders with wide faces underperform others in terms of financial returns by 4.5% the study found.

The researchers write ‘Testosterone can lead people to make irrational risk-reward tradeoffs.

‘The aggression, risk-seeking and egocentrism associated with testosterone could induce investment managers to engage in sub-optimal trading behavior such as trading excessively, purchasing lottery-like stocks and holding onto loser stocks’.