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Unreasonable risk

Hormones flood our bodies—and brains—at moments of stress. Does that make financial markets irrational?

By John Coates   July 2012

When you take risks, you are reminded in the most insistent manner that you have a body. For risk, by its very nature, threatens to hurt you.

A driver speeding along a winding road, a surfer riding a monster wave as it crests over a coral reef, a soldier sprinting across no-man’s land—each of these people faces a high chance of injury, even death. And that very possibility sharpens the mind and calls forth an overwhelming biological reaction known as the “fight-or-flight” response. In fact, so sensitive is your body to the taking of risk that you can be caught…

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