Emotional Engagement and Trading Performance

Bossaerts, Peter; Fattinger, Felix; Rotaru, Kristian; Xu, Katherine

doi:10.2139/ssrn.3661137

Cited by 5 publications

(4 citation statements)

References 47 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…In 2012, Fenton-O'Creevy et al ( 2012) provided a qualitative investigation of how antecedent-focused heartrate regulation improved trading performance, but response-focused regulation did not. Recently, Bossaerts et al (2020) confirmed the finding quantitatively, using the same experimental paradigm as in Smith et al (2014).…”

Section: In Summarysupporting

confidence: 57%

How Neurobiology Elucidates the Role of Emotions in Financial Decision-Making

Bossaerts

2021

Front. Psychol.

View full text Add to dashboard Cite

Over the last 15 years, a revolution has been taking place in neuroscience, whereby models and methods of economics have led to deeper insights into the neurobiological foundations of human decision-making. These have revealed a number of widespread mis-conceptions, among others, about the role of emotions. Furthermore, the findings suggest that a purely behavior-based approach to studying decisions may miss crucial features of human choice long appreciated in biology, such as Pavlovian approach. The findings could help economists formalize elusive concepts such as intuition, as I show here for financial “trading intuition.”

show abstract

Section: In Summarysupporting

confidence: 57%

How Neurobiology Elucidates the Role of Emotions in Financial Decision-Making

Bossaerts

2021

Front. Psychol.

View full text Add to dashboard Cite

show abstract

“…Recently, Bossaerts et al (2020) replicated the original study of Smith et al (2014), on which this study is based, and determined that heart rate changes of subjects anticipating trading at higher prices (in the bubble) lead to higher earnings and that trades precede heart rate changes and earnings decrease. They also found that subjects with higher skin conductance responses to stock market holdings have higher earnings.…”

Section: Future Directionsmentioning

confidence: 64%

Gazing through the bubble: an experimental investigation into financial risk-taking using eye-tracking

et al. 2023

View full text Add to dashboard Cite

Eye tracking can facilitate understanding irrational decision-making in contexts such as financial risk-taking. For this purpose, we develop an experimental framework in which participants trade a risky asset in a simulated bubble market to maximize individual returns while their eye movements are recorded. Returns are sensitive to eye movement dynamics, depending on the presented visual stimuli. Using eye-tracking data, we investigated the effects of arousal, attention, and disengagement on individual payoffs using linear and nonlinear approaches. By estimating a nonlinear model using attention as a threshold variable, our results suggest that arousal positively influences trading returns, but its effect becomes smaller when attention exceeds a certain threshold, whereas disengagement has a higher negative impact on reduced attention levels and becomes almost irrelevant when attention increases. Hence, we provide a neurobehavioral metric as a function of attention that predicts financial gains in boom-and-bust scenarios. This study serves as a proof-of-concept for developing future psychometric measures to enhance decision-making.

show abstract

“…However, they did not show any relation between skin conductance and traders' earnings. In contrast, Bossaerts et al [22], in a study using a trading game, reported that skin conductance responses were associated with traders' earnings.…”

Section: Introductionmentioning

confidence: 87%

Skin conductance predicts earnings in a market bubble-and-crash scenario

Wichary,

Allenbach,

von Helversen

et al. 2023

Preprint

View full text Add to dashboard Cite

In financial markets, profit is usually associated with risk-taking, as those who take risks, use the opportunities that markets present. However, during market bubbles, risk-taking might lead to losses, whereas risk aversion can lead to more profit. Emotion-based warning signals might play a role here by helping to recognize when risk aversion is preferable. To study this, we used a trading simulator, where 27 male participants traded on a historical stock price trend during a market bubble-and-crash scenario, and we continuously monitored their skin conductance level. We found that participants earning the most were characterized by an adaptive pattern of risk-taking —they invested much in the asset in the initial phase of the bubble but sold their stocks before the crash. Their skin conductance level was closely associated with the price trend, peaking before the crash started. This suggests that skin conductance provided a bodily warning signal in this group. Moreover, in high earners, skin conductance level correlated negatively with the proportion of stocks, indicating that the high earners used this warning signal to sell stocks. These results underscore the adaptive role of bodily signals in decision-making and elucidate the neural basis of success in uncertain financial markets.

show abstract

Emotional Engagement and Trading Performance

Cited by 5 publications

References 47 publications

How Neurobiology Elucidates the Role of Emotions in Financial Decision-Making

How Neurobiology Elucidates the Role of Emotions in Financial Decision-Making

Gazing through the bubble: an experimental investigation into financial risk-taking using eye-tracking

Skin conductance predicts earnings in a market bubble-and-crash scenario

Contact Info

Product

Resources

About