What’s next, the ‘Cortisol Index’?

recent study and several articles about it have highlighted the role of physiology in trading. We have discussed the role of strategy, logic, and psychology in the markets, but physiology has often been overlooked.

The paper looks at the role of the stress hormone cortisol, noting that it increases with market volatility. When cortisol levels go up, according to the research, traders are less willing to take risk.

If this is true, there must be a very high correlation between cortisol and the CBOE Volatility Index. Higher levels of the hormone would drive the VIX even higher as equity assets get sold and protection is bought to reduce risk.

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