Sometimes it's best not to keep your cool. In fact, hotheaded stock investors make better decisions, a study in the Academy of Management Journal showed. Adding emotions to the decision-making process can enhance creativity, engagement and decision efficiency, the researchers wrote in the study.
The greater the average intensity of an individual's feelings, the higher their investment returns, they found. The study monitored 101 stock investors in a simulated trading exercise spanning four weeks. "Contrary to the popular belief that the cooler head prevails, people with hot heads--those who experienced their feelings with greater intensity during decision-making--achieved higher decision-making performance," they wrote.
But showing emotion on the trading floor is still a controversial subject. "I'm no friend of emotion in trading," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey, who has been trading stocks for more than 25 years. "It's much more important to be disciplined."
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