Risky cravings

“When you are threatened with extinction, you act like nothing matters,” said Andrew Lo, a professor at M.I.T. who has studied the role of emotions in trading. Mr. Kerviel, he said, is a case study in loss aversion.

“The best traders are the ones who have controlled emotional responses,” Mr. Lo said. “Professional athletes have the same reaction – they use emotion to psych them up, but they don’t let those emotions take them over.”

‘Craving the High That Risky Trading Can Bring’ – New York Times

3 responses to “Risky cravings

  1. “When you are threatened with extinction, you act like nothing matters.”

    This from a professor at MIT. Wow. So, basically, all that good research and the best he can come up with is this? How banal. (I read his collaborative paper with Steenbarger and Repin, which was pretty good.)

    And the story on Kerviel is not over yet. The investigation is widening and we may yet find that he wasn’t acting alone. So Lo’s armchair quarterbacking (to stay consistent with is simile) is premature — and sophomoric.

    I know I sound like an asshole, but there it is. Methinks Lo assumes too much — even if he winds up being right Kerviel.

    Pundit PhDs are a dime a dozen these days, it seems.

  2. I hear you Jay, I quoted it because I experienced the ‘nothing matters blankness’ sensation recently, but I have to agree that it can’t be reduced to such a simple statement. For one thing, the mode of the threat of the extinction surely has a big role in determining one’s response (ie, aggressive or defensive).

  3. when i had my blowup years ago, i faced a similar emotion

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