Menu
Finance

Investing with Controlled Emotions

False hunches can cost stockbrokers a fortune, even when they are convinced that their decision had been carefully considered. Brian Uzzi, Professor at the Kellogg School of Management at the Northwestern University in Evanston in the USA, wants to change all that. Uzzi has developed a system that keeps dealers updated about their current emotional state based on a real-time analysis of their emails and instant messages. It then lets them know the most propitious time to make economic decisions. 

06.03.2017

For many years, Professor Uzzi has been researching the links between the emotional state of share traders and their stock market success. Uzzi and his team analysed over 1.2 million instant messages from day traders over a period of two years, and discovered that dealers who were either extremely emotional or not emotional enough made relatively poor deals. After all, our pattern formation behaviour, i.e., the way we interpret and categorise facts and conditions, is dominated by emotions. But, they also influence our ability to take risks as soon as we wish to take a decision on a rational basis. 

Brian Uzzi is convinced that the best trades are executed when the degree of emotional activation is at an intermediate level, when dealers are thinking clearly, but are still able to react appropriately to risks. For his evaluation, the algorithm assesses the emotional undertone in the dealer’s electronic communications with the aid of a dictionary. Words that fall outside of the “healthy emotional range” are, for example, “damage”, “annihilate” and “kick” and even less striking terms such as “news” or “gold”.

Uzzi’s algorithm is a good example for the fact that, even in the financial industry, the collaboration between man and machine continues to advance and already goes far beyond computer assisted high frequency trading. The “collaboration” could lead to better results for individual traders in future and might also prevent them from taking unwelcome risks when feeling stressed. In the case of chess, it was found that not only did chess playing algorithms push human players to new heights, but in fact the best results were achieved by computers and professional chess players working together as a team. At the same time, the advance of algorithms and artificial intelligence into the financial industry also involves new disruptive potential, which is likely to facilitate the emergence of new business “ecologies” and models. 

More news

Technology

Artificial Intelligence as Inventor and Developer

New applications for AI.

27.05.2017
Read more
Finance

Digital Cryptocurrency in Barcelona

Local currencies are proliferating. 

27.05.2017
Read more
Technology

Immersive Exosuits with Textile Muscle Fibres

The next steps towards cyborgism. 

27.05.2017
Read more
Agriculture

Agricultural Robotics for Efficient Indoor Farming

Vertical farming for salad heads.

27.05.2017
Read more

Drone-Based Logistics for Remote Regions

New pilots and prototypes.

27.05.2017
Read more

Christian Grünwald is happy to answer any questions you might have.

Contact Dr. Christian Grünwald

Newsletter

Receive the regular Z_punkt newsletter in your mailbox. Sign up now.

Ok