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Do Emotions Expressed Online Correlate with Actual Changes in Decision-Making?: The Case of Stock Day Traders

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  • Bin Liu
  • Ramesh Govindan
  • Brian Uzzi

Abstract

Emotions are increasingly inferred linguistically from online data with a goal of predicting off-line behavior. Yet, it is unknown whether emotions inferred linguistically from online communications correlate with actual changes in off-line activity. We analyzed all 886,000 trading decisions and 1,234,822 instant messages of 30 professional day traders over a continuous 2 year period. Linguistically inferring the traders’ emotional states from instant messages, we find that emotions expressed in online communications reflect the same distributions of emotions found in controlled experiments done on traders. Further, we find that expressed online emotions predict the profitability of actual trading behavior. Relative to their baselines, traders who expressed little emotion or traders that expressed high levels of emotion made relatively unprofitable trades. Conversely, traders expressing moderate levels of emotional activation made relatively profitable trades.

Suggested Citation

  • Bin Liu & Ramesh Govindan & Brian Uzzi, 2016. "Do Emotions Expressed Online Correlate with Actual Changes in Decision-Making?: The Case of Stock Day Traders," PLOS ONE, Public Library of Science, vol. 11(1), pages 1-11, January.
    • Handle: RePEc:plo:pone00:0144945
    DOI: 10.1371/journal.pone.0144945
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    References listed on IDEAS

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    1. Karim S Kassam & Amanda R Markey & Vladimir L Cherkassky & George Loewenstein & Marcel Adam Just, 2013. "Identifying Emotions on the Basis of Neural Activation," PLOS ONE, Public Library of Science, vol. 8(6), pages 1-12, June.
    2. Wilcox, Nathaniel T, 1993. "Lottery Choice: Incentives, Complexity and Decision Time," Economic Journal, Royal Economic Society, vol. 103(421), pages 1397-1417, November.
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    4. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
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    1. Manda, Vijaya Kittu & Sana, Alekhya, 2021. "Impact Of Mental Health And Well-Being Of Indian Stock Market Traders," MPRA Paper 109941, University Library of Munich, Germany.
    2. Khalid A. Bin Abdulrahman & Abdulaziz Yahya Alsharif & Abdulrahman Bandar Alotaibi & Abdulrahman Ali Alajaji & Abdullah Ali Alhubaysh & Abdulrahman Ibrahim Alsubaihi & Nahaa Eid Alsubaie, 2022. "Anxiety and Stress among Day Traders in Saudi Arabia," IJERPH, MDPI, vol. 19(18), pages 1-10, September.
    3. Beckert, Jens & Arndt, H. Lukas R., 2024. "The Greek tragedy: Narratives and imagined futures in the Greek sovereign debt crisis," MPIfG Discussion Paper 24/4, Max Planck Institute for the Study of Societies.

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