Many people still wonder how stress can cause hair loss. Studies show that stress leads to hair loss in a process called telogen effluvium. The human body usually reacts to mental stress similarly to physical stress. When you get stressed, your body reacts by arresting the process of hair growth. Stress leads to the release of cortisol hormone that has effects on the hair follicle. Once the follicle is affected, hair loss occurs. Additionally, an increase in androgen hormones results in hair loss.