"These findings help us to understand the motivations for risk-taking behaviour, which is a major component of economic theory," said Anna Dreber, of the Program in Evolutionary Dynamics at Harvard University and the Stockholm School of Economics.
"Risk preferences are one of the most important preferences in economics, and yet no one knows why they differ between men and women, why they change over age, or what makes men trade more in the financial market," she added.
For the study, the researchers collected saliva samples were taken from 98 males, ages 18 to 23, who were mostly Harvard students.
The samples were taken before participation in the investment game, so the researchers were certain that testosterone levels were not elevated as a result of the game. The researchers also assessed facial masculinity, associated with testosterone levels at puberty.
All of the participants were given 250 dollars, and were asked to choose an amount between 0 dollars and 250 dollars to invest. The participants kept the money that was not invested.
A coin toss determined the investment's outcome, and if the participant lost the coin toss, the money allocated to the investment was lost.
However, if the coin toss was won, the participant would receive two and a half times the amount of their investment. At the end of the study, one person was selected by lottery to receive the cash amount of their investment, which created a monetary incentive for the participants.
The researchers found that a man whose testosterone levels were more than one standard deviation above the mean invested 12 percent more than the average man into the risky investment.
A man with a facial masculinity score of one standard deviation higher than the mean invested 6 percent more than the average man.
"Although our findings do not address causality, we believe that testosterone may influence how individuals make risky financial decisions," said Coren Apicella, of Harvard's Department of Anthropology. The results are available online in Evolution and Human Behaviour.
"Financial risk might be comparable to other risky male behaviours associated with reproduction.
"Men may be more willing to take financial risks because the payoffs, in terms of attracting mates, could be higher for them. This is because women value wealth more than men when choosing for a mate," Apicella added.