Testosterone, Emotions and the Stock Market

Very interesting article in THE WALL STREET JOURNAL, Science Journali CALLED "Testosterone May Fuel Stock-Market Success or Make Traders Tipsy."

Quoting from the article, som EQ-type tidbits:

• ...scientists exploored how the natural chemistry of fear, confidence and exhiliration can influence financial choices in ways that defy logic ...
• "We want to know how the endocrine system and the brain work together to produce financial behavior."
• from MIT financial economist Andrew Lo - "We need to understand that physiological aspects of brain behavior really impact financial decisions."
• To all surface appearances, "the experienced traders were quiet and poker-faced, in control," said Dr. Coates, a former Wall Street trader. "In fact, underneath their cool exteriors, their endocrine systems [emotions] were on fire. It is almost as if they had learned not only to control these hormones but also to harness them."

This is almost a definition of emotional intelligence -- i.e., learning to control/manage your emotions but, more importantly, to HARNESS them.

Want to learn how? Take THE EQ COURSE. Special retro prices until the emotional economy calms down. :-) email me at sdunn@susandunn.cc for more information, or visit www.susandunn.cc/EQcourse.htm and then email for special price.

We learn better when we learn together.

Want to Succeed: Have a Strategy

And more than that, stick to it.

The article ACT FAST AND KISS YOUR RETURNS GOODBYE by Brian Richards, featured on The Motley Fool talks about what's called "the action bias." Acting fast and losing applies to the stock market ... and also to life. In fact, here's an analogy they give from the soccer world, about how to succeed.

Unless something has fundamentally changed, they say, "The most dangerous thing you can do in those cases is to lose your sense of perspective. Because once you do that, you'll convince yourself that you need to do something...[and] doing something is trouble, pure and simple."

From the article:

Soccer really does explain the world
The next time you experience a down day or portfolio gyration, think about those words of wisdom before jumping from one strategy to another. Or even better: Don't do anything at all. (One good way to handle volatility is to simply not quote your stocks so much.)

In a 2005 study, "Action Bias Among Elite Soccer Goalkeepers: The Case of Penalty Kicks," five Israeli professors found that while "the utility-maximizing behavior for goalkeepers is to stay in the goal's center during the kick, in 93.7% of the kicks the goalkeepers chose to jump to their right or left."

In other words, in a high-stress situation, the most efficient decision -- inactivity -- was taken but 6% of the time. The researchers hypothesized that the reason for the discrepancy was "action bias":

According to the norm theory, people have stronger feelings associated with outcomes when they come from abnormal causes. Consequently, because the norm is that goalkeepers jump to one of the sides, the disutility associated with missing a ball might be greater following a non-common behavior (staying in the center) than following normal behavior (jumping to the side).

Next time you find yourself with an itchy trigger finger on a tough market day [or just a tough day], remember the plight of the elite soccer goalkeeper.

And keep this in mind about emotions. It's necessary and good to have them, and to know them, but that doesn't mean you have to take your emotional temperature or pulse 20 times a day.

Let me help you learn more about emotional intelligence. Email me at sdunn@susandunn.cc for programs, courses, and personal coaching.

Read the full article here.

In the article, they quote Tim Hanson's stock advice:

1. A consistent philosophy.
2. A sense of perspective.
3. Daily discipline.

Not a bad game plan.
Let me help you strategize for success.

Emotions and Wall Street

From the article, How to Stop Your Emotions from Wrecking Your Returns in the Wall street Journal this week (Getting Going - WSJ.com)

Make no mistake: Emotions can hurt your investment results. For instance, a
study published in Psychological Science in June 2005 found that people with impaired emotional responses made more-sensible financial decisions.

These folks, who had lesions on their brains that limited their emotional reactions, were more willing to take gambles where the potential payoff easily outweighed the potential loss. "When people with normal emotional reactions lost, they got discouraged and stopped gambling," notes one of the study's authors, George Loewenstein, an economics professor at Carnegie Mellon
University.

Emotions can also help, supplying the motivation to focus on our finances, plan for retirement, save diligently and avoid excessive risk. "Without emotion, we wouldn't be able to make the sort of trade-offs essential to our financial survival," argues Andrew Lo, director of the Massachusetts Institute of Technology's Laboratory for Financial Engineering.

As you might gather, handling our emotions is a juggling act. Intense
emotions can be helpful, making us more engaged in what we are doing. But to be successful, we also need to figure out what's going on with our feelings and then limit the impact, suggests a study in August's Academy of Management Journal.

"People who can pinpoint their emotions are less likely to be affected by them," explains Myeong-Gu Seo, co-author of the study and a management professor at the University of Maryland. This self-knowledge is part of a broader notion sometimes dubbed "emotional intelligence."

"Women have greater emotional intelligence than men," notes John Ameriks, an investment analyst at Vanguard Group.

A few notes here. First of all, according to Reuven Bar-on's exceelent research, women do not have "greater emotional intelligence than men." Men and women actually test the same overal. They vary significantly on how they test on the individual competencies however. If you'd like more information on this, email me at sdunn@susandunn.

And if you'd like to INCREASE YOUR EMOTIONAL INTELLIGENCE, email me at sdunn@susandunn.cc for some coaching. It's what I do.

Holidays, Stock Market, Mass Hysteria

Take a break and remember the Reason for the Season

People are writing me from all over the world about the Black Friday sales and people getting up at 4 am to go to the sales in the US. It almost looks like mass hysteria. A shopping frenzy, like a feeding frenzy. The action when you've forgotten the reason for the action.

And then there's the stock market.

This is a good time to work with your emotional intelligence. You know that poem "When you can keep your head about you when others are losing theirs"?

I'm thinking too about the bbc interview with the Norwegian ship captain who did the rescue for the Explorer. The interviewer kept asking how the passengers felt, were they afraid, etc. The captain stuck to the matter at hand. They were rescued, had food and services. No, he hadn't been able to talk to them - HE WAS BUSY RESCUING THEM and keeping his head about him.
A good thing to keep in mind when there's mass hysteria and panic going on. This sort of situation leads to impulsive actions - like, I'm going to settle this once and for all. The kind of energy that makes us end relationships when they didn't need to end, pop the question to the wrong person, buy high and sell low.

The urge to impulsivity makes us THINK we have do something, and worse than that, do ANYTHING. It's not good emotional intelligence and it's hard to hold the center when it seems like everyone else is ...

To learn more about emotional intelligence, take THE EQ COURSE. It would be a good use of your time right now, as well as attending to the "real meaning" of the holidays. Which, regardless of your religious perspective, came from the word "holy days."

Email me at sdunn@susandunn.cc

Emotions and the Stock Market

Applications of Emotional Intelligence, that's what it's all about. And there's nothing more emotional than MONEY.

I came across a blog about understanding the basics of the US stock market. It's called The Bullhunters Guide, referring to the bull market of course, and is to guide people through understanding the basics of the US stock market. Now, in coaching emotional intelligence, I still run in to people who consider it not masculine to "be emotional." As long as we're dealing with stereotypes, isn't the stock market and finances a 'masculine' domain? And isn't the stock market one of the most emotional things out there - hysterical, even. Panic often appears to drive it. That's one of the things stock brokers have to work hard with in clients, especially inexperienced ones.

That having been said, this entry was entitled "Emotional Intelligence," so lets look at what she says. "Funny thing...life," it begins. "Just when you think you have it all together it comes up with another challenge,"

From the article:

If you are a trader already and have money in the stock market then you know how you react or respond when our trades don’t happen the way you want them to. It is just a matter of learning from your trades and not being attached to them... [If you suffer a loss] ... If you happen to react and start kicking and screaming and feeling sorry for yourself, then you have not learned the lesson. If this happens you can make some bad choices.

Rather, if you respond and change the way you view the situation, you will do even better the next time. If you are trading for cashflow, then you really have to have a plan in place. I am not here to advise you on your rules for trading as everyone eventually finds the way it works for them. It’s like learning anything new, you try a system and then tweak it to suit your personality. So its a little like when you are in your car driving along… do you focus on the bugs on the windscreen or on your destination? If you let the little things in life get in the way and focus on the trades that didn’t go your way, that’s what you will keep on getting. Take charge of your emotional intelligence today and focus on your destination with a sense of certainty. You will be a whole lot happier on your journey.

Why did I flash on "dating"?

Read the whole article on The Bullhunters Guide.