Cashing in in 2010

A link to a fine article written by Bob Frick over at http://www.kiplinger.com/ on poker and investing - specifically how working on the former can greatly improve your skill in the latter.

The article features insights from MarketPsych's Frank Murtha, as well as from Daniel Negreanu, which - if you're a poker fan - is always at treat.

Fun and interesting stuff.

MarketPsych offers advanced coaching/seminars to traders, financial analysts, financial advisors, money managers as well.

If you want to get better at your game, give us a shout at info@MarketPsych.com for more information.

Cheers. And good luck in 2010.

Dr. Frank Murtha

Testosterone and Sexy Ladies

While this isn't yet a porn site (so long as the profit motive doesn't overcome our desire to educate investors), we should report on two independent studies that are showing a correlation between Testosterone, sexy photos and financial risk taking.

I'm not talking about "financial porn."

I know it sounds strange, but a hormone level (Testosterone) correlates with higher trading returns (see this study). Taking external testosterone won't boost returns, but having a higher baseline level in the morning, independent of other events, may increase the aggressiveness of risk-taking and lead to higher returns. However, while the effect was significant, the sample size was fairly small (17) and homogenous (intra-day traders).

Seeing an unrelated sexy photo increases financial risk taking (See Brian Knutson's study here), which is where the above image comes from. Knutson's study indicates that external, irrelevant photos that activate our old friend, the Nucleus Accumbens, appear to have a lingering and substantial impact on subsequent risk taking. This may explain why casinos put ther female staff in revealing clothes and car companies and others use lightly clad women to sell their completely unrelated products. The dopamine surge accompanying the sight of a sexy photo increases financial risk taking going forward. There are other stimuli that also cause dopamine release in the Nucleus Accumbens, and these can plausibly be assumed to increase financial risk taking as well. As I have mentioned in the past, the genius of Knutson's studies is that the researchers are able to PREDICT financial risk-taking behavior. This allows them to study behavioral modification techniques in future experiments. That cannot be said of virtually all other neurofinance studies, including the Testosterone study cited above. In fact, the authors' media comments about the Testosterone effect are highly speculative (can you give a trader testosterone or cortisol to alter their financial risk taking? - now that would be a predictive study), and Testosterone is likely working through the Dopamine circuits anyway.

Happy Investing!
Richard