Male traders, like animals in the wild, take more risk when their testosterone levels rise. Research by myself and my colleagues found that moderately elevated levels of this hormone increased the profits of high-frequency traders – although at higher levels it can cause overconfidence and risky behaviour, morphing traders into Masters of the Universe.

What we could not say, however, was whether testosterone was having its beneficial effects by increasing the trader's skill or merely by increasing his appetite for risk.

In a study published today in PLoS ONE we found that testosterone had little to do with trading skill. Traders with higher testosterone did indeed do better at this type of trading, because they took more risk. But there was no link between the hormone and their trading skills, as measured by the Sharpe ratio (of which more later). Testosterone alone was not enough.