Emotion regulation and trader expertise: Heart rate variability on the trading floor.

Abstract

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.

Antecedents and consequences of chronic impulsive buying: Can impulsive buying be understood as dysfunctional self‐regulation?

“…While, BIS, BAS and emotion regulation have indirect effects on financial outcomes, there is also evidence suggesting direct effects (or possibly effects mediated via unmeasured variables). Consistent with prior research on financial decision‐making (Fenton‐O'Creevy et al., ; Fenton‐O'Creevy et al., ), effective emotion regulation (higher reappraisal and lower suppression) is associated with less difficulty in making ends meet, although not with lower susceptibility to adverse financial events. Reappraisal also moderates the effect of impulsive buying such that with greater habitual use of reappraisal emotion regulation strategies, impulsive buying has less detrimental effect on Making Ends Meet.…”

“…However, it is also important to consider the possibility of a direct effect . First, there is evidence that more effective emotion regulation is associated with more effective financial decision‐making (e.g., see Fenton‐O'Creevy et al., ; Fenton‐O'Creevy, Soane, Nicholson, & Willman, ). Hence:…”

Intuition, expertise and emotion in the decision making of investment bank traders

“…However, consistent with our qualitative results, there was a significant relationship between experience and HF HRV such that more expert traders appeared to regulate their emotions more effectively, responding flexibly moment by moment to market events (Fenton-O'Creevy et al, 2012).…”

Measuring Emotional Arousal for Online Applications: Evaluation of Ultra-short Term Heart Rate Variability Measures

“…the classification generalizes over all subjects. HRV parameters are influenced by a large variety of different factors such as age and gender [35] or expertise [36]. Therefore, using HRV parameters for analysis of different arousal states might be better suited in a scenario where a classifier is trained in a subject-dependent way.…”