We describe a psychophysiological study of the emotion regulation of investment bank traders. Building on work on the role of emotions in financial decision making, we examined the relationship between market conditions, trader experience, and emotion regulation while trading, as indexed by high-frequency heart rate variability (HF HRV). We found a significant inverse relationship between HF HRV and market volatility and a positive relationship between HF HRV and trader experience. We argue that this suggests that emotion regulation may be an important facet of trader expertise, and that learning effects demonstrated in financial markets may include improved emotion regulation as an important component of that learning. Our results also suggest the value of investigating the role of effective emotion regulation in a broader range of financial decision-making contexts.

PurposeThis paper explores the direct and indirect associations between financial resilience and life satisfaction, using the moderation of non-impulsive behavior and mediation of financial satisfaction.Design/methodology/approachThe authors analyze the Australian household dataset, named the Household, Income and Labour Dynamics in Australia (HILDA) Survey, to meet the objectives of this paper. Furthermore, the authors use the PROCESS Models 4 and 7 to test the mediation and the combined moderated mediation relationships, respectively.FindingsThe authors find the complete mediation of the relationship between financial resilience and life satisfaction by financial satisfaction. Also, this study finds that both financial resilience and non-impulsive behavior positively contribute to financial satisfaction, which is positively associated with life satisfaction.Practical implicationsThis research supports the need for consumers to build emergency funds as financial resilience is related to consumer well-being. This research also recommends that impulsive behavior should be addressed by the personal finance curriculum and financial advisors.Originality/valueThis research contributes by showing that financial satisfaction is an important predictor of consumers’ well-being. The ability to access financial resources, which increases for non-impulsive consumers, is associated with increased life satisfaction but only via financial satisfaction.

PurposeThis study aims to test a moderated mediation model for a twofold purpose. First, to examine the mediating role of financial capability (FC) in the association between financial literacy (FL) and financial well-being (FW). Second, to analyze if non-impulsive future-oriented behavior (NIB) moderates the associations of FL with FC and FL with FW.Design/methodology/approachThe authors use the PROCESS macros in IBM SPSS Statistics to test the moderated mediation model and analyze the 2016 wave of the Household, Income and Labor Dynamics in Australia Survey.FindingsThe empirical analysis shows that FC partially mediates the association between FL and FW. Furthermore, the moderated mediation analysis shows that NIB strengthens the associations of FL with FC and FL with FW. Specifically, the positive associations of FL with FC and FL with FW significantly increase for those consumers who score high on NIB.Practical implicationsThe findings have implications for the financial services industry. Professional financial planners can positively improve the ability of consumers to deal with their financial matters by highlighting the importance of FL and NIB.Social implicationsThe study findings suggest educating consumers to discourage impulsive behavior and encourage them to create financial plans as it will enhance their ability to conduct financial tasks efficiently, improving their FW.Originality/valueTo the authors’ knowledge, this is the first study to assess a moderated mediation model, which examines the role of FC as a mediator variable and NIB as a moderator variable in the association between FL and FW.

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The disposition effect is an investment bias where investors hold stocks at a loss longer than stocks at a gain. This bias is associated with poorer investment performance and exhibited to a greater extent by investors with less experience and less sophistication. A method of managing susceptibility to the bias is through use of stop losses. Using the trading records of UK stock market individual investors from 2006 -2009, this paper shows that stop losses used as part of investment decisions are an effective tool for inoculating against the disposition effect. We also show that investors who use stop losses have less experience and that, when not using stop losses, these investors are more reluctant to realise losses than other investors.

The Open University's repository of research publications and other research outputs Is the disposition effect related to investors' reliance on System 1 and System 2 processes or their strategy of emotion regulation?

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Research has shown that investors trade too frequently and that this overtrading lowers investment return. This paper examines the characteristics of those investors that trade frequently. Using over three years of trading data of 7 200 investors at a brokerage firm in the UK, descriptive statistics and multiple regression analyses were able to identify the predictive characteristics of investors that trade often. Most noteworthy is that trading frequency is positively skewed resulting in a small proportion of investors doing the majority of the trading with the highest cumulative value. These frequent trading investors tend to be male, younger and make use of multiple mediums of trading to trade. These mediums include the internet, the telephone, an advice team and use of stop losses.