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Charting Trader Stress By Economic Release Type
A recent study by J.M. Coates and J. Herbert analyzes "Endogenous steroids and financial risk taking on a London trading floor" confirms that risky activity tends to increase testosterone levels, and that high testosterone levels increase risky ventures. This is about as remarkable as a Federal Reserve "finding" commissioned using taxpayer dollars, and is pretty high up there on the Captain Obvious pyramid of scientific discoveries. One wonders how Vegas' multi-billion economy will adjust its business model now that it knows that gambling, arousal and testosterone are all related. Yes, that was rhetorical. Amusingly, the study discloses the following: "No subject consumed anything during the study that would interfere with his endocrine system." That also sounds very credible. Yet the most interesting discovery in the finding is the correlation of cortisol, or stress hormone, levels with various economic releases among which home sales, durable goods, jobless claims, Chicago PMI, ISM and NFP. What is curious is that cortisol peaks not on NFP, which has traditionally been seen as the most important macroeconomic metric and the one in which the BLS takes a most active expectations management role, but during ISM releases. Is it time for the Department of Truth to LBO the Institute of Supply Management?
The figure below shows a correlation between mean daily cortisol, implied bund volatility, and type of key economic data release:
The scientific secription of the chart:
Group cortisol plotted against implied volatility of German Bunds. Implied volatility in most bond markets follows the calendar of U.S. economic statistics, rising during the week of Chicago Purchasing Managers Index (PMI), peaking on or just before the Employment Report, and dropping after the information contained in these numbers has reduced uncertainty over the state of the economy. The upper line is the daily cortisol level averaged from the group of traders (left axis, pg/ml; mean SEM, n 11). The lower line is the implied volatility from German Bund (bond future) options with 1 month to expiration [right axis; Annualized standard deviation of the natural logs of daily price returns. Friday options (days 4 and 8) repriced to Sunday to eliminate the weekend effect. Bloomberg data]. Shaded bars display the importance of each economic release. The bars represent regression-derived day weights, i.e., the extra variance in Bund yields expected on that day due to the release of the U.S. economic statistic [lower left axis; basis points in yield change (12)]. The bars are for illustrative purposes only and do not enter into the statistical analysis. Implied volatility on day 5 was higher than expected, given the relative importance of the Chicago PMI, because the German market was surprised by the result of the French referendum.
Does this mean anything aside from the glaringly obvious? Probably. It may indicate that the specific weighting of the two most important economic releases, based at least on trader behavior is switched, and that the ISM is in fact a more important metric in determining market reaction and volatility than NFP.
Someone far smarts would likely be able to come up with a way to arb muted market reactions to the ISM.
Incidentally, the next ISM reading, due on November 1, and before the mid-terms and the QE2 announcement, may be thus even more important than the revised GDP read, which the Fed announced will be critical in determining whether QE2 is a go. Therefore, a strong GDP coupled with a weak ISM will almost certainly also validate the issuance of a few trillion in crisp dollar bills in just over a week.
h/t Tim
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Looks like some new FemBots are now being recruited to hand out more Monster Energy to the 17-year old traders at Fidelity during the "high stress" events during trading hours.
LOL....
In order:
Slut, skank, oh hell no and get a nose job (for starters).
Robo, we love ya man yet seriously you need to try:
NWS!!!!!!!
http://www.google.com/images?hl=en&safe=off&q=brazilian+women&wrapid=tlif12880155046811&um=1&ie=UTF-8&source=og&sa=N&tab=wi&biw=971&bih=601
Is this the sign of a Top ?
So this morning, on no news, HAL got his morning rise. Oh boy.
As we run full retard into the highs of this past spring.... Fed better deliver on all the build up they've been pumping as we are grossly over-bought.
I know the GDP "estimate" will be complete bullshit, but I am wondering how much they can pump it up before the election. If the Consumer Metrics Institute has any predictive power in it's short history, it should be an interesting fall this Fall.
http://www.consumerindexes.com/commentary_2010_dailygrowthindexvsgdp_ful...
Now THAT is interesting ... (not Robo's pic, the study ... ok, Robo's pic is interesting too)
Robos pic is interesting, why does the blonde have her finger up her nose?? That is so not hot. For the article, " gambling, arousal and testosterone are all related" I thought that was obvious. All the pawn shops/hookers near casinos sorta prooves it.
ha! Like anyone would kick either of these 'ladies' out of bed...lol
gotta love obvious studies
Gary Busey concurs...
http://www.youtube.com/watch?v=LJlire0VawY
I have went through scores of these studies and if nothing they lend an extra dimention to trading objectivity. For example, when i start shaking, my hands are freezing, my shit turns into slinky shitplasm, i cant do neat handwriting and i dont want to eat...then i know its time to stop trading! as my cortisol levels have went through the roof.
Did anyone know that excessive cortisol secretion can even cause pituitary brain tumours? Headache anyone? Secreted in healthy amounts, cortisol along with other glucocorticoids, can keep you safe, sharp, slim, healthy, and wealthy. But for most, its just a ruthless murderer. Its affects your bones, immune system, liver, heart, brain, teeth, skin, hair, lungs, blood and balls and many more things we might want to cherish above money. Who wants to retain their good looks? Did you know that elevated levels of cortisol destroys collagen, in fact cortisol induced collagen loss in the skin is ten times greater than in any other tissue. So the next time some fine looking young thing turns her head away from you, blame trading.(unless of course you have bought a Bentley with your trading profits, in that case its still bloody tragic)
Are you wondering why your faeces is flying out of your ass quicker than a low latency HFT and smelling like a dead cat? cortisol stimulates gastric acid secretion, the excretion of ammonium and also has an affect on the mucus membrane coating of the faeces itself, hence its slinky qualities. Fancy a touch of osteoporosis? Cortisol can set that up for you. What about your intelligence? Have you always prided yourself on your secret genius? Long-term exposure to cortisol erodes the cells and neurotransmitters in the hippocampus, leading to short term memory loss and impaired learning. Cortisol also depletes serotonin receptors resulting in a possible clinical depression, woohoo! We could go on here, and look at things like impotence, kidney failure, anorexia nervosa, insomnia, aggression, dehydration, brain tumours, diabetes and blood pressure but you get the idea by now. And all this can be achieved by just being in a perpetual state of uncertainty! Moral of story; dont over-trade. TRADING KILLS.