ABSTRACT
The hubris risk factor in this chapter is irrational exuberance. The case study is trading in the financial markets. The chapter begins with a discussion of a phenomenon that is found across species in the animal kingdom—the ‘winner effect’. It then explores the role that testosterone plays in the winner effect and how this translates to human behaviour and the decision-making processes, how it can fuel irrational exuberance. The chapter explores research evidence for testosterone’s effects on trading performance in financial markets and its potential role in boom and bust cycles. The relationship between testosterone and narcissism (as a dispositional factor in hubris) is discussed. The chapter concludes with a discussion of how exposure to testosterone-fuelled irrational exuberance can be avoided and what the early warning signs of irrational exuberance are.
