The Psychophysiology of Real-Time Financial Risk Processing / Andrew W. Lo, Dmitry V. Repin.

Format:

Book

Author/Creator:

Lo, Andrew W.

Contributor:

National Bureau of Economic Research.

Repin, Dmitry V.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8508.

NBER working paper series no. w8508

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2001.

Summary:

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 decisionmaking 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 defined. In a sample of 10 traders, we find significant correlation between electrodermal responses and transient market events, and between changes in cardiovascular variables and market volatility. We also observe differences in these correlations among the 10 traders which may be systematically related to the traders' levels of experience.

Notes:

Print version record

October 2001.