NCCR Finrisk Doctoral Workshop, June 12, 2006, Gerzensee Emotions meet Finance Emotions meet Finance...

NCCR FinriskDoctoral Workshop, June 12, 2006, Gerzensee

Emotions meet

Finance

Emotions meet

Finance

Klaus SchererAstrid Hopfensitz

The many fathers of affective science

The affective revolution: Nobel prizes in Economics

Herbert Simon, 1978bounded rationality, emotions as interrupts

Reinhard Selten, 1994affect in non-cooperative games

Amartya Sen, 1998affectice aspects of commitmentand justice

Daniel Kahneman, 2002heuristics, affective bases of judment and decision

Vernon Smith, 2002experimental economics R. J. Aumann T. C. Schelling, 2005

conflict and cooperation, game-theory analysis

Scientific research in the behavioral, human, and social sciences Establish a truly interdisciplinary network of researchers studying

affective phenomena Address affect and emotion for the first time in a systematic and

integrated way, on multiple levels of analysis Encourage cutting-edge research on emotion, using advanced

methodology Academic education and research training

Increase the critical mass of excellent researchers with interdisciplinary training and a strong ability for networking

Furthering the academic advancement of women Knowledge transfer and application in society

Identify means for a realistic transfer and application of scientific understanding of emotional phenomena

Provide pertinent data and insights to orient political, social, and economic decisions

Objectives of the NCCR in Affective Sciences

Existing research networks in Affective Sciences:Critical mass in Swiss universities

NeuchâtelBern

Geneva

Zurich

Fribourg

Psychology

Philosophy

Economics

Political Science

Law

PsychiatryHistory of religion

Neuroscience

Psychology

Psychology

Psychology

Lausanne

Education

Literature

Criminology

Sociology

Sociology

Philosophy

Component process model Appraisal and efferent motor expression

Event Relevance Implication CopingNormativeSignificance

Memory Self ConceptMotivation ReasoningAttention

this is noveland important

this will obstructmy goals

I can deal with this

this is unfairand immoral

What is the mechanism that produces facial expressions?

A sequential unfolding of facial movements resulting from successive appraisals of the situation?

An innate affect program that produces an emotion-specific pattern when triggered by an event?

The apex of the expression is the same but the process is different. Research on the dynamics of facial expression is required to settle this question that has important theoretical implications.

Watch now! Watch now!

OR

Projects and transversal modules

Emotion elicitation and perception

Emotion elicitation and perception

Emotion regulationEmotion regulationSocial functions of

emotionSocial functions of

emotion

Appraisal and MotivationScherer/Gendolla

Appraisal and MotivationScherer/Gendolla

Norm complianceFehr

Norm complianceFehr

Response patterningScherer/Kaiser

Response patterningScherer/Kaiser

Neural architectureVuilleumier/Landis

Neural architectureVuilleumier/Landis

Regulation and FamilyPerrez/Reicherts

Regulation and FamilyPerrez/Reicherts

Work and EmotionsSemmer/Tschan

Work and EmotionsSemmer/Tschan

Executive functionsVan der Linden

Executive functionsVan der Linden

Values and NormsMulligan

Values and NormsMulligan

Emotions and LawFlückiger/Robert/RothEmotions and Law

Flückiger/Robert/Roth

Myths and RitesBorgeaud

Myths and RitesBorgeaud

Methodological developmentMethodological development

Life-span development and transitionsLife-span development and transitions

Pro- and antisocial affect and behaviorPro- and antisocial affect and behavior

The nature and consequences of gender differencesThe nature and consequences of gender differences

Appraisal and motivational processes in the elicitation of emotionKlaus Scherer & Guido GendollaUniversity of Geneva, Psychology

The elicitation of emotional experience is explained by the current motivational state and the process of subjective appraisal of events.

Topics include:

The dynamic unfolding of the appraisal process

The role of motivation for mobilization of effort and the appraisal of performance outcomes

Dispositional biases in appraisal

Social and cultural dimensions of appraisal

Project 1

Finance professionals may face specific conditions for appraisal: High stakes, uncertain consequences, high urgency, limited control and coping ability, conflicting norms and expectations.

Potential research topics:

Appraisal biases in investors: Myopic loss aversion

How traders appraise significant events

Trader types: Dispositional appraisal biases

Emotional climate in the stock market due to shared appraisals

The role of attention in continuously ongoing appraisal processes

Skills in appraising client reactions

Project 1 meets Finance

Response patterningKlaus Scherer & Susanne KaiserUniversity of Geneva, Psychology

Emotional response patterning is expected to be driven by successive appraisal outcomes.

Topics include:

Experimental manipulation of appraisal criteria and measurement of the effects on different response domains

The relationship between gestural, facial, vocal and postural expression of emotions

Measurement of gestural, facial, vocal and postural expression in dyadic interaction

Project 2

The special nature of the appraisal processes in finance contexts may generate specific types of response patterning with respect to motor expression, physiology, and conscious feelings.


Mode synchronization given rapid reappraisals

Emotional competence in response regulation generating trust

Emotional competence in recognizing others' emotions

Emotion work with clients

Emotional contagion on markets: emotions can spread


Lo and Repin, The Psychophysiology of Real-Time Financial Risk Processing, Journal of Cognitive Neuroscience, 2002

- Measure physiological reactions during real trading

- Combine these observations with market data

Findings:

- Differences in physiological reactions dependent on behavior of market.

- Individual differences between traders.

Illustrative studies

Analysis difficult in such ‘real’ decision situations.

- It is difficult to infer emotions exclusively from physiological measures

- Emotional reactions spill over from one situation to the next. Difficult to disentangle effects.

- Situation often involves many factors unknown to researcher.

Therefore most studies have focused on risk taking for simple gambles

• Bosman and van Winden, Global risk, Effort, and Emotions in an Investment Experiment, 2001

• Hopfensitz and van Winden, Dynamic Choice, Independence and Emotions, 2006

Findings:

- Dependent on risk: different emotions are considered- Dependent on situation: same emotions have different effects. 0

p = 1/2 (1- p) = 1/2

project A

project B

Illustrative studies

Neural architecture of emotion perception and affect-related cognitionPatrik Vuilleumier & Theodor LandisUniversity of Geneva, Neuroscience

Examining the cerebral bases (anatomical and temporal patterns) of affective and social perception, using brain-imaging techniques.

Topics include:

Brain activation in response to faces displaying different emotions and to the subjective appraisal of their affective value in different contexts

The role of attention in affective processing

Neural bases of cognitive control and individual differences in emotional processing

Project 3

Neurofinance: What are the underlying neural mechanisms in risk assessment, utility inference, and decision making


Neural bases of intuition

How is risk interpreted in the brain, e.g. in ‘Gambling Tasks’

Neural bases of individual differences: Impulsivity, sensation seeking

Hyperbolic discounting: immediate gratification is special (McClure et al 2004, Science)

Risk versus Ambiguity: different neuronal reactions


Individual and social regulation of emotions in the familyMeinrad Perrez & Michael ReichertsUniversity of Fribourg , Psychology

Understanding emotion regulation as underlying processes of pro- and antisocial behavior, with a particular emphasis on affective relationships in the family.

Topics include:

Elaboration of a taxonomy of individual and social emotion regulation behaviors

The effects of different types of social emotion regulation responses in daily couple and family interaction on parents’ well-being, parenting, and child behavior

Defining behavioral rules for adaptive social emotion regulation

Project 4

Given the high level of stress and emotionality of work in finance, stress resilience and adequate coping strategies are at a premium. So is social regulation in the work team and the family.


Asssessing patterns of stress experiences and resilience

Emotional competence in individual and social regulation

Adequate assessment of coping potential

Advanced methods of experience sampling


Work and emotions: Effects onwell-being, health, and productivityNorbert Semmer & Franziska TschanUniversity of Bern; University of Neuchâtel, Psychology

Examining working conditions in terms of job design and social relationships as they relate to affective experience, especially stress.

Topics include: Assessment of working conditions, personal characteristics,

social relations, work-life balance, and private stressors and resources

Measuring the effects on health, well-being, attitudes, and commitment toward one’s organization in a major longitudinal survey and in-depth studies

Project 5

Finance professionals work in challenging environments at a high level of pressure and risk. In addition to difficult working conditions often their self is at stake.


Competition and envy: influence on risk taking

Burnout and emotional work

Funds managers: impact of shame / guilt on behavior

Spill over of emotions from work – life, or from work – work

Values and the role of the self


Emotion regulation, impulsivity, and executive functionsMartial Van der LindenUniversity of Geneva , Psychology

Impulsivity as an important aspect of self-regulation.

Topics include:

The different components of impulsivity

The various cognitive processes (and related brain substrates) that contribute to these dimensions of impulsivity

The development of impulsivity in adolescence and its contribution to the development of antisocial behaviors

Project 6

Given the time pressure and urgency of decisions as well as high stakes, personality dispositions in impulsivity may play a significant role.


Executive space in cognitive processing

Factors and components of impulsivity

Can hyper-impulsivity be treated?

Impulsivity and anti-social behavior


Emotional foundations of norm compliance and norm enforcementErnst FehrUniversity of Zurich, Behavioral Economics

The role of emotions in the pro- and antisocial behavior of ordinary people and criminal offenders.

Topics include:

Which emotions are involved in norm compliance and enforcement ?

What is the neural basis of norm compliance and enforcement ?

Do criminal offenders exhibit fewer or different emotions when compared with non-criminal control groups ?

Does the pattern of brain activation associated with norm compliance and norm violation in criminal offenders differ from the pattern in non-criminal controls ?

Project 7

Neuroeconomics and Neurofinance – the neural basis of normative behavior and equity decisions.


In many market settings contracts are not enforceable: necessity of prosocial emotions (trust)

The ‘just world’ phenomenon (Melvin Lerner)

Please ask Ernst Fehr!


Emotion, values, and normsKevin MulliganUniversity of Geneva, Philosophy

Evaluation of the presuppositions embodied in the conceptual frameworks used in current work on affective phenomena using conceptual analysis, discussion of examples, and theory construction.

Topics include:

Are affective phenomena simply by-products of desires?

Are emotions appraisals?

Are norms more fundamental than values?

What is the relation between guilt and norm violation?

Project 8

Philosophy may help to examine some fundamental issues concerning the nature of appraisal and emotional reactions in finance contexts .


The role of values and utility

Conflict between norms and desires

Sources of shame and guilt (e.g., in investment consulting


The importance of emotions in social and legal regulationAlexandre Flückiger, Christian-Nils Robert,& Robert RothUniversity of Geneva, Law

Law may be strongly based on reason, but it is not immune to emotion. The project explores the currently observable “emotionalization of law”.

Topics include: Law as the product of emotion. e.g., the growing importance of

victims in legal proceedings Emotion as a support for, or even a means of regulating social

behaviors, e.g. the promotion of organ donor campaigns as an example of “soft law”

Project 9

The legal context of finance and its emotional ramifications.


Soft law – regulation and control in financial markets

Insider trading and popular response


Myths and rites as cultural expression of emotionPhilippe BorgeaudUniversity of Geneva, History of Religion

Myths and rites from ancient societies afford an ideal humanistic laboratory for an objective analysis of emotions in their relationship to normative and disruptive standards of behaviors.

Topics include: The study of ancient literary descriptions and iconographical

representations of emotions in Egypt, Mesopotamia, Israel, Greece, Rome, as well as in ancient Christianity and Islam, with some incursions into Far Eastern cultures

A comparative reflection on the anthropology of the person : self-definitions of the human (generally males) in contrast to definition of the "others" (strangers, females, or gods)

Project 10

Historical and anthropological issues


History of trust in markets (e.g. diamond traders, …)

Religious constraints of financial activity

Social values and intrecultural differences


Pro- and antisocial behavior Study determinants of prosocial and antisocial behavior and underlying mechanisms.

Gender differences Systematically assess gender differences in all empirical studies and diagnose potential causes. Identify remedial action on the basis of the results.

Life span development Assess age group differences whenever possible. Diagnose potential causes due to changes in cognitive development, socialization, motivation, etc. Identify risk factors and potential for remedial action.

Advanced methods Identify common methodological needs. Develop and share a comprehensive method toolbox. Promote mutual fertilization of methodological approaches.

Transversal modules: overview and aims

Four transversal modules integrate overarching issues into the research design of several projects, consider the implications of different studies for knowledge transfer and application, and synthesize the relevant results.

Transversal integration of perspectives

Unified concepts, methods, and tools

Collaboration with major international centers of learning and research

Common focus of research: affect

Participation of most relevant disciplines

Multiple levels of analysisPsychological

Historical

Neuro-physiological

Interpersonal

Group dynamics

Social/Cultural

Focussed interdisciplinarity

Added value through synergy

The added value specific to the NCCR is achieved through four mechanisms:

1. Export/Import of competences: No project can be carried out as planned without the collaboration of other NCCR members

2. Transversal modules: Cross-project syntheses will be achieved for four important thematic areas

3. Inter-project studies: Ideas for new collaborative research between projects are constantly emerging

4. Interdisciplinary education and training program: Fundamental research perspectives are evolving

The future of emotion

The members of the NCCR will also address challenging issues with respect to the evolution of ancient emotion mechanisms in modern society, such as:

Is shame disappearing as a consequence of growing hedonism, feelings of entitlement, and demands for individual freedom from social constraints?

How does the development of ever more efficient forms of communication and entertainment affect emotion and emotion regulation?

How will emotional avatars change our relationship to machines? Could social and technological progress overtax the inherent

flexibility of the emotion mechanism and outrun its evolution?

Further info: www.affective-sciences.org

NCCR Finrisk Doctoral Workshop, June 12, 2006, Gerzensee Emotions meet Finance Emotions meet Finance...

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