As part of my Master’s thesis, I have been rereading the novel “American Psycho” (1991) by Bret Easton Ellis, which is a first-person narrative of the life of an attractive, affluent and young “Manhattanite” named Patrick Bateman.

Bateman works as a vice president at a Wall Street investment company. Through present tense stream-of-consciousness narrative, the reader learns that not only is he a psychopathic serial killer, but that the most successful traders on Wall Street – odious alpha-males with high levels of aggression – are completely blind to this fact because of their obsession with making money and being the best.

Surprisingly, the story line came to mind after I read two recent transatlantic studies done at Cambridge and Harvard Universities where researchers claimed to have drawn a scientific connection between male testosterone on Wall Street and the current economic crisis.

Lead researchers at Cambridge – John Coates, who used to manage a trading floor at Deutsche Bank on Wall Street but is now at the Judge Business School, and Professor Joe Herbert, a neuroscientist – set out to study the brains of City traders to discover what makes them tick.

They measured levels of testosterone and cortisol (a stress hormone) in 17 traders at a City of London bank for eight consecutive business days. They found that those traders with higher testosterone levels in the morning were most likely to make money on that day’s trading.

One specific trader hit a six-day “winning streak” during which he made more than double his daily profit. During that time his testosterone levels went up 74 percent.

The team also found that cortisol levels among the traders increased when their earnings became more impulsive and the market was less stable.

Coates believes this work taps into what many scientists call the “winner effect,” which has been studied in numerous competitive situations such as athletics. This “effect” occurs in one-on-one competitions and men gain a testosterone boost when they win. It is a common belief that this boost gives them an advantage in the next round(s).

The results were published last week in the Proceedings of the National Academy of Sciences.

In Harvard, researchers based their findings on saliva samples from 98 male Harvard students taken before they played an investment game with $250 (real money). Researchers found that a man whose testosterone levels were “more than one standard deviation above the mean” invested into a risky investment 12 per cent more than average men.

The study, published in Evolution and Human Behavior, found that men with 33 percent more testosterone (than average men) invested 10 percent more of their money.

Even though these studies have been going on for years, “risk preferences are one of the most important preferences in economics,” according to lead author of the Harvard study Anna Dreber.

Dreber, a doctoral candidate in economics at the Stockholm School of Economics, is a visiting researcher at Harvard in the Program in Evolutionary Dynamics.

Cortisol is very significant, according to all researchers, because prolonged high levels of cortisol leads to anxiety and clouded judgment.

“You tend to see danger everywhere rather than opportunity. In that situation you don’t do anything.People get paralyzed by the fear. [It] takes over so they are no longer thinking rationally. They are no longer doing the things that they should be doing to make money,” Coates was quoted in the United Kingdom online source, guardian.co.uk.

At first, comparing America’s economic crisis to the novel ”American Psycho” seemed like a warped notion investment bankers on Wall Street are not secretly psychopathic murderers. Yet, there is something to be said about the similar blindness towards obvious dangers to society when one is obsessed with making money, which can be caused by genetics and social rearing.

There should not be reverse sexism towards men and their genes. However, people can’t ignore genetic differences between men and women such as testosterone levels.

It is proven that levels in women are much lower than men. They also decline with age. In 2005, women made up 87 percent of assistants, 19 percent of brokers and 29 percent of senior-level management on Wall Street according to a report issued by the Securities Industry Association and the Women’s Business Research Organization Catalyst, both based in New York.

The (seemingly) obvious resolution would be to balance out the testosterone on Wall Street with more women and older individuals who have lower testosterone levels and cooler heads.

“My great fear is that (after reading the Cambridge study) people will walk away with the idea that if you want to make money in the markets you had better have a lot of testosterone,” Coates said.

I couldn’t help but laugh. Coates “testosterone fear” has been a reality forever. People only noticed when America crashed. Shouldn’t that seem a little psycho?

Originally Published Sunday, Oct. 26, 2008