
Interoceptive Ability Predicts Survival on a London Trading Floor - marban
http://www.nature.com/articles/srep32986
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Dwolb
>We monitored these traders during a particularly volatile period (the tail
end of the European sovereign debt crisis) so the performance of each trader
reflected his ability to make money during periods of extreme uncertainty.

Shouldn't the market state be a pretty big experimental control?

If we're coming out of a downturn and the market is going up, on average
anybody taking a financial risk would be rewarded for doing so.

It would be interesting to see the same group in a financial situation in
which the market is at a peak and headed down. Are these traders who have
greater interoceptive ability able to take the _right_ risks since, on
average, those who take on risk before a downturn lose money?

~~~
mortehu
These guys were trading futures contracts. Unlike stocks, when you are long a
futures contract, someone else is necessarily short, so it won't be the case
that "anyone taking financial risk would be rewarded".

~~~
dubhrosa
Not necessarily - for stock index futures, the seller of the contract can
simultaneously buy the index of stocks. When the future contract reaches
maturity the seller has to "deliver" the basket of stocks to the buyer. Banks
and market makers make money writing (selling) such index futures by buying a
smaller basket of stocks than are strictly in the index to get the same hedge
effect (using principle component analysis, yay!), consolidating an entire
portfolio of contracts and having a single hedge, and also by having lower
transaction costs to buy/sell the underlying stocks than the clients
buying/selling the future would, because they already have all the expensive
exchange memberships, they also may have inventory, and they have dark pools,
in which their own traders get first priority.

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ramblenode
Interesting paper, but I have issues with some of the statistics--not helped
by the large number of seemingly exploratory analyses that give the impression
of a garden of forking paths.

1) The authors go through the work of doing several simpler analyses which are
obviated by the final multiple regression. The analyses (in Wilkinson
notation) _P &L_[0] _~ HBD_ [1] and _HBD ~ covariates_ only provide a subset
of the information in the final _P &L ~ HBD + covariates_. The paper would
improve if the preliminary analyses were replaced by a more thorough treatment
of the multiple regression.

2) From what I gather, the maximal model containing HBD and the covariates was
fit and then variables were subtracted successively based on whether doing so
reduced the AIC. This does not seem like the right choice at all, and could
possibly have influenced the final result. Selecting an optimal model is _not_
the goal here, yet that is what this process is designed to do. The research
question is about the influence of HBD on P&L, not predicting P&L from some
optimal combination of variables. So, the theoretically important covariates
should have remained when testing the significance of P&L. The point of the
covariates is to "control" for confounding factors or "stress test" the
importance of HBD in the presence of confounds, not to increase the predictive
power of the model.

3) Trader and session length are actually random variables but their error is
not modeled. Instead, the results from all sessions are averaged for each
trader. Taking the average has the result of undercounting the variance and
misspecifying the variance structure. Something like a multilevel model with
crossed random effects should have been used instead.

[0] "Average daily profit and loss" \- measure of trading performance.

[1] "Heartbeat detection score" \- how well the trader self-assesses their
heartbeat.

~~~
javiramos
Is 18 traders a large enough sample? To me (no expert), it seems like a really
small sample size..

~~~
ramblenode
It's a fairly small sample. However, in theory it's still possible to detect
an effect in a population using a small sample if the effect size is large
enough. Unfortunately, the paper doesn't present a measure of effect size,
e.g. standardized regression coefficients.

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SnakePlissken
There's a great anecdote about George Soros that this reminded me of: Despite
the palindrome writing two dense books and conducting numerous interviews on
his theory of 'Reflexivity'[0] as essential to his success, Soros' son thinks
it really comes down to something like interoceptive ability, which Soros
reasons is a combination of "theory and instinct"[1]:

.

.

 _According to his son, Robert, Soros’s trading was always influenced by more
than reflexivity. “My father will sit down and give you theories to explain
why he does this or that”, he once said, “but I remember seeing it as a kid
and thinking, ‘Jesus Christ, at least half of this is bullshit’.

“I mean, you know [that] the reason he changes his position on the market or
whatever is because his back starts killing him. It has nothing to do with
reason. He literally goes into a spasm and it’s this early warning sign.”

Soros has admitted to relying greatly on “animal instincts”, saying the onset
of acute pain was often “a signal that there was something wrong in my
portfolio”.

His decisions, then, “are really made using a combination of theory and
instinct”. _

[0]: [http://www.mercenarytrader.com/2014/02/lessons-from-the-
pali...](http://www.mercenarytrader.com/2014/02/lessons-from-the-palindrome/)

[1]: [http://bclund.com/2014/08/20/nothing-can-learn-george-
soros/](http://bclund.com/2014/08/20/nothing-can-learn-george-soros/)

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hiddencost
Oh awesome. That is a word I've been looking for.

It lead me to
[http://www.nature.com/neuro/journal/v7/n2/full/nn0204-102.ht...](http://www.nature.com/neuro/journal/v7/n2/full/nn0204-102.html)

Which formalizes the directions I've started to think about, namely the
connection and feedback loop between physical sensation and emotion.

~~~
jonmc12
You might like Craig's paper "Interoception and Emotion: A Neuroanitomical
Perspective"
[https://books.google.com.au/books?id=DFK1QwlrOUAC&pg=PA272&h...](https://books.google.com.au/books?id=DFK1QwlrOUAC&pg=PA272&hl=en#v=onepage&q&f=false)

He presents evidence that primate emotion evolved from interceptive awareness
- goes into fascinating detail about what we know of the underlying,
homeostatic, neuroanitomical structures and their evolution.

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tlb
"Our results suggest that signals from the body ... contribute to success in
the markets"

Does it suggest that physiological emotions help traders make good decisions?
Or does it suggest that conscious awareness of physiological emotions helps
traders compensate for gut biases and make more rational decisions?

~~~
tomhoward
The authors don‘t draw any conclusions either way ("Our study, being field
work, could not establish causation"), but they seem to lean toward the former
with this:

 _Traders in the financial world often speak of the importance of gut feelings
for choosing profitable trades. By this they mean that subtle physiological
changes in their bodies provide cues helping them rapidly select from a range
of possible trades the one that just ‘feels right’. Our findings suggest that
the gut feelings informing this decision are more than the mythical entities
of financial lore - they are real physiological signals, valuable ones at
that._

The suggestion here is that there is a way in which the mind/body are able to
rapidly process large amounts of information, beyond conscious
analysis/calculation, and report an answer as a "gut feeling", and that the
people who have a stronger ability to sense their physiological functions are
the people for whom this mechanism is more accurate.

This notion seems analogous with the thinking behind practices like meditation
and other mind+body "tuning in" exercises that have long been used in martial
arts training to develop better spatial awareness and more precise reflexes.

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malloryerik
Cyborg trading experiments, anyone?

What happens if you combine physiological signals with machine learning to
create an application that trades based on a human's "gut" along with other
input, and perhaps historical data?

You can imagine a man vs man-machine competition where a trader's regular
profit/loss is compared in real-time with the "enhanced" p/l.

What could be done if you network several traders' physiological signals and
mix with machine learning and automated trading?

Is anyone doing this kind of frankentrading? Could even imagine going for
scale with an Apple Watch physio-trading app :0

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Spooky23
I think that I've been able to observe a similar situation in my experience.
I've had the fortune of being at the point of various crises in my career
(massive system failures, natural disasters, man-made disasters, etc) in both
contributor and leadership roles.

When in those type of situations, I definitely have perceived a heightened
awareness, where the feeling is like being in the "zone". Decisions are
easier, communications more fluid. I tend to be a more instinctual person in
general, but these types of situations are far more pronounced.

~~~
newman314
What's interesting is that it's highly situational for me. I'm known as a
fixer for work related situations but I'm pretty risk adverse in my personal
life.

~~~
Spooky23
Same here.

I'm an awful negotiator in my personal life for cars, etc. I leave money on
the table all of the time. At work, a few guys dubbed my face over William
Shatner from a Priceline "negotiator" commercial and played it for the
christmas party after a particularly tough deal. :)

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taspeotis
Related reading [1] starting at "Looking into traders' hearts."

[1] [https://www.bloomberg.com/view/articles/2016-09-19/tough-
tar...](https://www.bloomberg.com/view/articles/2016-09-19/tough-targets-and-
short-term-projects)

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bayesian_horse
My issue is that they didn't control for blood pressure. I know that I could
tell my heart rate a lot easier before I regulated it down.

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cbsmith
Seems to me like one could just as easily conclude that people who are
generally more perceptive/aware would do better on the trading floor.

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nthcolumn
Am I more impressed that they managed to get traders to cooperate? Did some
distracted trader take a massive haircut for science?

