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Studies suggests link between testosterone, stock market instability
by Brooks Hays
Washington (UPI) Oct 20, 2017

Sunshine encourages more aggressive bidding at auctions
Washington (UPI) Oct 11, 2017 - If you're looking for a real estate steal, you better hope it rains on auction day. Sunshine tends to encourage higher bids at auctions, according to a new study of home sale prices in Australia.

"Weather is known to affect mood, and some studies have shown a link between the weather and stock prices, so we decided to look at weather and house prices," Adrian Lee, finance lecturer at the University of Technology Sydney, said in a news release.

Lee and his research partner Maggie Hu, finance professor at the Chinese University of Hong Kong, compiled the selling price of homes sold both privately and at auction in Sydney, Australia, between 2000 and 2014. They compared sales prices with daily measurements collected by the Bureau of Meteorology, including temperature, rainfall and solar exposure. Consumer sentiment survey data provided their analysis further context.

Their findings showed sunny days boosted the winning bid of homes sold at auction by 0.974 percent, nearly $11,500 based on the median sale price of a house in Sydney.

"There is a link between sentiment, or mood, as measured by consumer sentiment surveys, and asset prices -- including house prices," Lee said.

Warmer days had a similar effect on prices. Ten degrees of warmth translated to a 0.635 percent larger winning bid.

For bargain hunters, rainy days are when to shop. Homes sold at auction went for 0.174 percent less when it rained -- a savings of $2,050. Long weekends and holidays are other good times for bidders looking for a lower price.

"Houses are not priced rationally," Lee said. "The price is partly driven by people's feelings, particularly at auctions. So if you are buying or selling a house, it is good to be aware of these influences."

Private home sales were impacted by the weather.

Lee and Hu are scheduled to present their research at American Real Estate and Urban Economics Association Conference, being held in Philadelphia in January 2018.

New research supports the theory that testosterone influences the decision making of stock market traders, and could be a cause of market instability.

An international team of researchers recruited 140 young males to participate in experimental asset market simulation. Prior to the simulated trading period, the participants were given a topical gel containing testosterone or a placebo.

During the simulation, researchers had the young men post bids and request offer prices, as well as buy and sell assets. Though the assets they were trading were fake, their performance was rewarded with real money.

The experiment's results -- shared this week in the journal Management Science -- revealed more inflated price bubbles among markets inhabited by traders hopped up on testosterone.

Traders who received a placebo gel were more likely to employ a traditional stock market strategy: buy low, sell high. High-testosterone traders were more likely to deploy a more aggressive strategy: buy high to sell higher.

"This research suggests the need to consider hormonal influences on decision-making in professional settings, because biological factors can exacerbate capital risk," Amos Nadler, a researcher at the Ivey Business School at Western University, said in a news release. "Perhaps the simplest recommendation is to implement 'cool down' periods to interrupt exceptionally positive feedback cycles and return the focus to assets' fundamental valuations to reduce the possibility of biased decision-making."

Previous studies have suggested a greater number of women on trading floors could help ensure stock markets behave more rationally. Similarly, Nadler and his colleagues suggest trading firms may want to limit the risk taken by young male traders.

"This is the first study to have shown that testosterone changes the way the brain calculates value and returns in the stock market and therefore -- testosterone's neurologic influence will cause traders to make suboptimal decisions unless systems prevent them from occurring," said Nadler.

Despite Nadler's claim, the idea that testosterone and other hormones can influence the decision making of stock traders isn't new.

One previous study suggested testosterone increases the feeling that a person's good fortune is likely to continue, while another study determined both cortisol and testosterone triggered risk-taking and price instability among traders in an asset market simulation.

China eases foreign limits in finance as Trump leaves
Beijing (AFP) Nov 10, 2017
China gave US President Donald Trump a parting gift as he left Beijing Friday, easing limits on foreign ownership in the financial sector that the United States and Europe have long criticised. The announcement came after Trump capped his first state visit to Beijing by praising the "highly respected" President Xi Jinping as he took off for an Asia-Pacific summit in Vietnam. During his v ... read more

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