Cortisol is involved in the 'fight or flight' response.
The study, published in Scientific Reports, found that when given doses of either cortisol or testosterone, the participants buying and selling assets among themselves invested more in risky assets.
They measured the volunteers' natural hormone levels in one experiment and artificially raised them in another.
"Our view is that hormonal changes can help us understand traders' behavior, particularly during periods of financial instability," said Dr. Carlos Cueva, PhD, one of the lead authors of the study, from the department of economics at the University of Alicante, Spain.
Cortisol is elevated in response to physical or psychological stress, increasing blood sugar and preparing the body for a fight-or-flight response.
The authors suggest their findings could help with the development of more stable financial institutions.
The paper's conclusion is:
"Our results suggest that changes in both cortisol and testosterone could play a destabilizing role in financial markets through increased risk taking behavior, acting via different behavioral pathways."
Dr. Ed Roberts, from the department of medicine at the UK's Imperial College London and one of the lead authors of the study, says: "Our aim is to understand more about what these hormones do. Then we can look at the environment in which traders work, and think about whether it's too stressful or too competitive.
"These factors could be affecting traders' hormones and having an impact on their decision-making."
Some 142 volunteers, male and female, participated in the study, giving saliva samples for the measurement of the two hormones.
They played an asset trading game in groups of around 10. Those who had higher levels of cortisol were more likely to take risks, and high levels in the group were associated with instability in prices.
In a second experiment, 75 young men were given either cortisol or testosterone before playing the game. They were tested once while on the hormone and once while on a placebo.
Both hormones had an effect toward greater risk-taking in investments. Cortisol appeared to directly affect volunteers' preference for riskier assets, while testosterone seemed to increase optimism about how prices would change in the future.
Dr. Roberts says: "The results suggest that cortisol and testosterone promote risky investment behavior in the short run.
"We only looked at the acute effects of the hormones in the lab. It would be interesting to measure traders' hormone levels in the real world, and also to see what the longer term effects might be."