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What it argues
The Hour Between Dog and Wolf is John Coates's argument that financial markets are driven partly by biology, and specifically by the hormonal systems — testosterone and cortisol in particular — that evolved to prepare the body for physical challenges and that now operate on traders making millisecond decisions. Coates, a neuroscientist at Cambridge who spent a decade as a derivatives trader on Wall Street, ran field studies on a trading floor in London and measured the correlation between morning testosterone levels and afternoon trading profits. The results were striking enough to reshape how he thought about the relationship between bodily state and financial decision-making.
The core finding is what Coates calls the winner effect: winning trades increase testosterone, which increases risk appetite and confidence, which increases the likelihood of more wins — up to a point. Beyond a threshold, elevated testosterone leads to over-confidence, excessive risk-taking, and eventually the kind of catastrophic losses that precede market crashes. The same feedback loop operates on the way down: losing trades spike cortisol, which increases anxiety and risk aversion beyond what the situation rationally warrants, producing the paralysis and flight that amplifies crashes.
What it gets right
- 1.
Testosterone levels in the morning predict trading profitability in the afternoon. This correlation suggests that bodily state — not just information processing — shapes financial decision-making.
- 2.
The winner effect: winning raises testosterone, which raises confidence and risk appetite, which increases the likelihood of more winning — until the testosterone spike produces overconfidence and catastrophic losses.
- 3.
Cortisol is the stress hormone. In sustained losing conditions, cortisol elevation produces excessive risk aversion that goes beyond rational reassessment: traders stop making decisions that have clear expected value.
What it covers
Who wrote it
John Coates spent a decade as a derivatives trader at Goldman Sachs and Deutsche Bank before earning a doctorate in neuroscience from Cambridge University, where he subsequently ran a research program on the biology of financial risk-taking. His field studies on London trading floors produced some of the most widely cited work on hormones and economic decision-making. The Hour Between Dog and Wolf, published in 2012, brings together his trading experience and his scientific research. He has also advised financial regulators and central banks on the neurobiological dimensions of market volatility.
