Fear and Greed in Financial Markets: A Clinical Study of Day-Traders
We investigate several possible links between psychological factors and trading performance in a sample of 80 anonymous day-traders. Using daily emotional-state surveys over a five-week period as well as personality inventory surveys, we construct measures of personality traits and emotional states for each subject and correlate these measures with daily normalized profits-and-losses records. We find that subjects whose emotional reaction to monetary gains and losses was more intense on both the positive and negative side exhibited significantly worse trading performance. Psychological traits derived from a standardized personality inventory survey do not reveal any specific "trader personality profile", raising the possibility that trading skills may not necessarily be innate, and that different personality types may be able to perform trading functions equally well after proper instruction and practice.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 95 (2005)
Issue (Month): 2 (May)
|Contact details of provider:|| Web page: https://www.aeaweb.org/aer/|
More information through EDIRC
|Order Information:||Web: https://www.aeaweb.org/subscribe.html|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mittal, Vikas & Ross, William T., 1998. "The Impact of Positive and Negative Affect and Issue Framing on Issue Interpretation and Risk Taking," Organizational Behavior and Human Decision Processes, Elsevier, vol. 76(3), pages 298-324, December.
- David Hirshleifer & TYLER G. SHUMWAY, 2004.
"Good Day Sunshine: Stock Returns and the Weather,"
- Anna Krivelyova & Cesare Robotti, 2003. "Playing the field: Geomagnetic storms and international stock markets," Working Paper 2003-5, Federal Reserve Bank of Atlanta.
- Isen, Alice M. & Geva, Nehemia, 1987. "The influence of positive affect on acceptable level of risk: The person with a large canoe has a large worry," Organizational Behavior and Human Decision Processes, Elsevier, vol. 39(2), pages 145-154, April.
- Colin Camerer & George Loewenstein & Drazen Prelec, 2003. "Neuroeconomics: How neuroscience can inform economics," Levine's Bibliography 506439000000000484, UCLA Department of Economics.
- George Loewenstein, 2000. "Emotions in Economic Theory and Economic Behavior," American Economic Review, American Economic Association, vol. 90(2), pages 426-432, May.
- Andrew W. Lo & Dmitry V. Repin & Brett N. Steenbarger, 2005.
"Fear and Greed in Financial Markets: A Clinical Study of Day-Traders,"
American Economic Review,
American Economic Association, vol. 95(2), pages 352-359, May.
- Andrew W. Lo & Dmitry V. Repin & Brett N. Steenbarger, 2005. "Fear and Greed in Financial Markets: A Clinical Study of Day-Traders," NBER Working Papers 11243, National Bureau of Economic Research, Inc.
- Mark J. Kamstra & Lisa A. Kramer & Maurice D. Levi, 2003.
"Winter Blues: A SAD Stock Market Cycle,"
American Economic Review,
American Economic Association, vol. 93(1), pages 324-343, March.
- Jon Elster, 1998. "Emotions and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 47-74, March.
- Brandstatter, Hermann & Guth, Werner, 2000. "A psychological approach to individual differences in intertemporal consumption patterns," Journal of Economic Psychology, Elsevier, vol. 21(5), pages 465-479, October.
When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:95:y:2005:i:2:p:352-359. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros)or (Michael P. Albert)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.