The Psychophysiology of Real-Time Financial Risk Processing
A longstanding controversy in economics and finance is whether financial markets are governed by rational forces or by emotional responses. We study the importance of emotion in the decision-making process of professional securities traders by measuring their physiological characteristics (e.g., ski...
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| Veröffentlicht in: | Journal of cognitive neuroscience 2002-04, Vol.14 (3), p.323-339 |
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| container_title | Journal of cognitive neuroscience |
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| creator | Lo, Andrew W. Repin, Dmitry V. |
| description | A longstanding controversy in economics and finance is whether financial markets are governed by rational forces or by emotional responses. We study the importance of emotion in the decision-making process of professional securities traders by measuring their physiological characteristics (e.g., skin conductance, blood volume pulse, etc.) during live trading sessions while simultaneously capturing real-time prices from which market events can be detected. In a sample of 10 traders, we find statistically significant differences in mean electrodermal responses during transient market events relative to no-event control periods, and statistically significant mean changes in cardiovascular variables during periods of heightened market volatility relative to normal-volatility control periods. We also observe significant differences in these physiological responses across the 10 traders that may be systematically related to the traders' levels of experience. |
| doi_str_mv | 10.1162/089892902317361877 |
| format | Article |
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We also observe significant differences in these physiological responses across the 10 traders that may be systematically related to the traders' levels of experience.</description><identifier>ISSN: 0898-929X</identifier><identifier>EISSN: 1530-8898</identifier><identifier>DOI: 10.1162/089892902317361877</identifier><identifier>PMID: 11970795</identifier><identifier>CODEN: JCONEO</identifier><language>eng</language><publisher>One Rogers Street, Cambridge, MA 02142-1209, USA: MIT Press</publisher><subject>Behavioral psychophysiology ; Biological and medical sciences ; Blood Pressure ; Cognition - physiology ; Commerce ; Decision making ; Electromyography ; Emotions ; Emotions - physiology ; Female ; Financial executives ; Fundamental and applied biological sciences. Psychology ; Galvanic Skin Response ; Heart Rate ; Humans ; Investments ; Male ; Miscellaneous ; Models, Economic ; Psychology. Psychoanalysis. Psychiatry ; Psychology. 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We study the importance of emotion in the decision-making process of professional securities traders by measuring their physiological characteristics (e.g., skin conductance, blood volume pulse, etc.) during live trading sessions while simultaneously capturing real-time prices from which market events can be detected. In a sample of 10 traders, we find statistically significant differences in mean electrodermal responses during transient market events relative to no-event control periods, and statistically significant mean changes in cardiovascular variables during periods of heightened market volatility relative to normal-volatility control periods. We also observe significant differences in these physiological responses across the 10 traders that may be systematically related to the traders' levels of experience.</description><subject>Behavioral psychophysiology</subject><subject>Biological and medical sciences</subject><subject>Blood Pressure</subject><subject>Cognition - physiology</subject><subject>Commerce</subject><subject>Decision making</subject><subject>Electromyography</subject><subject>Emotions</subject><subject>Emotions - physiology</subject><subject>Female</subject><subject>Financial executives</subject><subject>Fundamental and applied biological sciences. Psychology</subject><subject>Galvanic Skin Response</subject><subject>Heart Rate</subject><subject>Humans</subject><subject>Investments</subject><subject>Male</subject><subject>Miscellaneous</subject><subject>Models, Economic</subject><subject>Psychology. Psychoanalysis. Psychiatry</subject><subject>Psychology. 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Psychophysiology</topic><topic>Risk-Taking</topic><topic>Securities trading</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Lo, Andrew W.</creatorcontrib><creatorcontrib>Repin, Dmitry V.</creatorcontrib><collection>Pascal-Francis</collection><collection>Medline</collection><collection>MEDLINE</collection><collection>MEDLINE (Ovid)</collection><collection>MEDLINE</collection><collection>MEDLINE</collection><collection>PubMed</collection><collection>CrossRef</collection><collection>Chemoreception Abstracts</collection><collection>Neurosciences Abstracts</collection><collection>Technology Research Database</collection><collection>Engineering Research Database</collection><collection>ProQuest Health & Medical Complete (Alumni)</collection><collection>Biotechnology and BioEngineering Abstracts</collection><collection>MEDLINE - Academic</collection><jtitle>Journal of cognitive neuroscience</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Lo, Andrew W.</au><au>Repin, Dmitry V.</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>The Psychophysiology of Real-Time Financial Risk Processing</atitle><jtitle>Journal of cognitive neuroscience</jtitle><addtitle>J Cogn Neurosci</addtitle><date>2002-04-01</date><risdate>2002</risdate><volume>14</volume><issue>3</issue><spage>323</spage><epage>339</epage><pages>323-339</pages><issn>0898-929X</issn><eissn>1530-8898</eissn><coden>JCONEO</coden><abstract>A longstanding controversy in economics and finance is whether financial markets are governed by rational forces or by emotional responses. 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| ispartof | Journal of cognitive neuroscience, 2002-04, Vol.14 (3), p.323-339 |
| issn | 0898-929X 1530-8898 |
| language | eng |
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| source | MEDLINE; MIT Press Journals |
| subjects | Behavioral psychophysiology Biological and medical sciences Blood Pressure Cognition - physiology Commerce Decision making Electromyography Emotions Emotions - physiology Female Financial executives Fundamental and applied biological sciences. Psychology Galvanic Skin Response Heart Rate Humans Investments Male Miscellaneous Models, Economic Psychology. Psychoanalysis. Psychiatry Psychology. Psychophysiology Risk-Taking Securities trading |
| title | The Psychophysiology of Real-Time Financial Risk Processing |
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