The emotional business of finance Prof. Mark Fenton-OCreevy.

Slides:



Advertisements
Similar presentations
Ági Hello. My name’s Ági and I’m a 10th course student in our grammar school. I really feel good here, love my classmates, we have been getting on well.
Advertisements

Personal Finance Chapter 1: Personal Financial Planning
Support For Morality As A Social Contract
Career Identity How to find the best career for YOU! Viki Chinn - LSE Careers Adam Sandelson – Student Counselling Service.
Tremendous Power I’ve come to the frightening conclusion that I am the decisive element in the classroom. It’s my personal approach that creates the climate,
New Supervisor: Skills for Success
Partner reward – a help or a hindrance to effective business development? Peter Scott Peter Scott Consulting
Rights and Wrongs of Belief Clifford, James. W.K. Clifford This short essay remains quite famous today. Clifford is worried about cases it’s.
HDI 2015 Conference and Expo Mary L. Cruse Director of IT First American Title Insurance Co. Coaching is.
BUSINESS ORGANIZATIONS
Introduction about sources of finance
Attitude.
Discussion examples Andrea Zhok.
JA Dollars With Sense. Overview IntroductionsExpectations Lesson 1: Let’s Talk Money Lesson 2: Be A SMART Shopper Lesson 3: Look After Your Money Lesson.
Attitudes and Behavior. I. What is an attitude? A. Attitude: a favorable or unfavorable evaluative reaction toward something or someone (developed, maintained,
Chapter 2 Preview Bellringer Key Ideas What Are Life Skills?
TELEPHONE INTERVIEWS : Telephone Interviews are very popular in modern fast work culture. Telephone interviews are often conducted by employers in the.
Part 2: Planning and Strategy Chapter 4
How to find a job! (HTFAJ) Source:
Helping students imagine the future they want to create. Helping students imagine the future they want to create.
CHAPTER 8 SOLVING PROBLEMS.
DO NOW The last item you purchased was__________. What motivated you to purchase that item?
Sales Concepts and Apps Introduction to our term together GLFD 2003.
GYRO : Gyro : Why I Want To Help gyro To Create Ideas That Are Humanly Relevant.
Efficient Market Hypothesis EMH Presented by Inderpal Singh.
Sporting Spirit Values Statements for Players, Coaching & Volunteering roles, Primary Level and Whole School.
By: Ian Jackson Jordan. Types of marketing activities Advertisements Packages of products Product Description Sales people Marketing Activities.
A.N.T.’sA.N.T.’s Automatic negative thoughts. What Do You See?
Understanding Human Behavior Helps Us Understand Investor Behavior MA2N0246 Tsatsral Dorjsuren.
Building Relationships with Departments and Leaders By William Miller Miller Consulting.
OVERCOMING OBJECTIONS. I Don’t Have Time Is time really the issue or whether the current time is a bad time for you to present/offer the opportunity?
MARKETING. Standards… BCS-BE-36: The student demonstrates understanding of the concept of marketing and its importance to business ownership. BCS-BE-36:
Copyright © by Holt, Rinehart and Winston. All rights reserved. Chapter 2: Skills for a Healthy Life 1.I review all of my choices before I make a decision.
ToK - Emotion What do you think of when you hear the word ‘Emotion’?
Advantage Understand Personality Styles & Develop Rapport June 12, 2011 for Sales.
“Carers who changed our lives”. Carers who changed our lives … She’s made me more happy She always makes me smile and laugh She looks after me and is.
© 2013 Reed International Books Australia Pty Limited trading as LexisNexis. Permission to download and make copies for classroom use is granted. Ancillary.
Daniel C. Finley President and Co-founder Advisor Solutions, Inc. Managing Your Inner Advisor Strategies for Getting Off the Emotional Roller Coaster.
“Doing it Very Right the Second Time” Early one morning in Washington DC……..
Life Coaching.
Copyright © by Holt, Rinehart and Winston. All rights reserved. Chapter 2: Skills for a Healthy Life 1.I review all of my choices before I make a decision.
Slide 1 Improving your Persuasion and Influencing Skills for better negotiated outcomes Presented by Katrena Friel March 2009.
MERGERS AND ACQUISITIONS: BEST PRACTICES AND WORST PITFALLS PRESENTED BY DEV WARREN CEO ASCENDANT ADVISORY GROUP, LLC.
We are learning to … give reasons for our views..
The Nonrational Escalation of Commitment The Nonrational Escalation of Commitment Presented by: Hamid Shekari Omid Keivanloo.
Investment and portfolio management MGT 531.  Lecture #29.
Marketing to Women. The Role of Women In the last 10 years More women are leaving the corporate world to start their own business Women-owned businesses.
“Success Comes in Can’s not Can’ts!!” 1. What are Values 2. How do we develop them? 3. What is the Decision Making Model? 4. What are the Trouble Rules?
Fundamental of International Business Negotiation
Make me a Superhero!. Session 1 Learning Objective To explore and develop qualities that can contribute to building resilience. Learning Outcomes To understand.
DECISION MAKING. GET READY FOR CLASS Pick up – Lesson 3: Decision Making Take out your homework assignment from last time. – Make sure everything is completed.
The Definition of Price. The Price is Right Product 1.Hummer H2 2.Dodge Durango 3.GMC Envoy 4.Ford Explorer Price A. $27, B. $26, C. $48,
Positive Discipline: Helping children develop self-discipline, responsibility, cooperation, and problem-solving skills By Angie Studer.
Quality Directions Australia Influencing Medical Staff A major point of difference.
Depression. Today we will be able… to recognize some symptoms of depression to understand facts about depression to challenge the stigma around depression.
Introduction to Economics What do you think of when you think of economics?
Dealing with Difficult People Presented by Paul Lyons Effective Training & Consulting Services.
Language Learning for Busy People These documents are private and confidential. Please do not distribute.. Intermediate: I Disagree.
I.B.E.A.R Present Me PowerPoint. 1 st Scenario The scenario is you and your friends are having fun playing basketball. Another friend arrives a little.
Trading well over two-trillion dollars every single day, the Foreign Exchange Market is absolutely enormous. This is why it is so intimidating to new.
Why does this matter to you? How much choice do you have about the way in which you act around this situation? Who are the key players in this situation?
Making Good Decisions.  A decision is a choice that is made.  What is a good decision?  A decision in which you have carefully considered the outcome.
My Money Personality. My Money Personality Your money personality guides how you use money Values Beliefs Attitudes Expectations Emotions are part.
Words Matter – Communication Strategies for Success
Cognitive Social Theory
Skills for a Healthy Life
Cognitive Social Theory
Handout 5: Feedback and support
Review Trading Results 6 of 7 series.
Presentation transcript:

The emotional business of finance Prof. Mark Fenton-OCreevy

Phineas Gage ( )

Amygdala Hippocampus Advances in neuroscience research

Facts Options for decision Representation of future outcome Situation Reasoning strategies Decision Activation of biases related to previous emotional experience of comparable situations Bechara, A., Damasio, A., Tranel, D., & Damasio, A. R Deciding advantageously before knowing the advantageous strategy, Science, Vol A dual process view of cognition

Trader Manager Trader

Different categories of emotion in traders decision-making Interaction between mood and trading Intuition: it feels like the right answer Empathy: a sense for what other market players are feeling

Emotional self-regulation (Low performers) Im bit of a cold fish; I dont think emotions greatly affect my decision making. If you are making money, you are achieving your objective.… [But later] …When you lose money, it can be horrendous, violent mood swings. You dont know what to do when you lose money… Managers on the desk are an added pressure, and my colleagues, so this emotion can encourage you to make decisions more quickly.… It is important to have a recovery period from losses to be more emotionally stable before you go back in [to trading]. I think there is, [a strong emotional element to trading] I think that anyone whos doing it properly and has got their head screwed on is doing everything they can consciously to overrule that, and if I feel that Im trading emotionally I will walk off the desk, have a glass of water, walk up and down the street and then come back and make decisions when Im hopefully not emotional.

Emotional self-regulation (High performers) Emotion and rationality are not at opposite ends, they co-exist the entire time. You buy in at 50, they go to 48, you refuse to believe it. Your rational side says youve got it wrong. Your emotional side says the market is wrong so you buy some more. They go to 46; youre really pissed off now, youre not going to sell them, youre not going to take this. They go to 42 your rational side kicks in and says I got this wrong and I am out and it doesnt necessarily - I am not suggesting it happens in that sequence every time but the two always co-exist. The two always co-exist. Big losses and big gains can swap around fairly quickly and once you understand that then you stop concentrating on the loss and you start concentrating more on how to make money back. … One big trade is not going to make anyone and one big loss doesnt destroy you.

Bringing the data together

Key findings Emotions play a role both beneficial and adverse in the financial decision making of finance professionals Effective management of emotions is associated with improved performance Improved self-regulation of emotions can be trained This all turns out to be true for private investors but more so.

But what about consumers?

Impulsive buying: a consumer's tendency to buy spontaneously, unreflectively and, immediately, (Rook & Fisher, 1995) I often buy things spontaneously. I often buy things spontaneously. "Just do it" describes the way I buy things I often buy things without thinking "I see it, I buy it" describes me "Buy now, think about it later" describes me.

Key findings We can understand impulsive buying as a form of maladaptive emotion regulation to promote good feelings and repair bad feelings Impulsive shopping has significant adverse financial consequences. Retailers invest significant resources in engaging with our emotions to promote impulsive buying (Because you are worth it) – perhaps we need an investment in education which promotes emotional literacy about money

Attitudes to money Money as power Money as love Money as freedom Money as security Strong relationship to financial outcomes

A final observation Policy makers often seek to influence behaviour by providing information Firms, through advertisements often seek to influence behaviour through engaging with emotions Guess who is more pessimistic about affecting consumer behaviour?