Table 1. Daily Median Errors in Stock Trading and Daily Emotional Activation as Measured via Online Communications.
Fixed effect regression showing the relationship between changes in the daily emotional activation of day traders and the size of their trading decision errors as measured by the deviation in trading profits from the optimal trades for the day that could have taken place within the same 5 minute window as the actual trade that did take place. Results suggest an inverted U shaped relationship between the magnitude of decision errors and the level of emotional activation of the decision maker. Consistent with prior work, the more IMs exchanged by a trader the better their trading decisions [18–19]. Robust standard errors clustered on trader ID showing are shown. SI File presents null models, robustness checks, and detailed explanations of control variables.
| VARIABLES | Coefficient | Robust SE |
|---|---|---|
| Emotional Activation t | -1.260** | -0.518 |
| Emotional Activation2 t | 0.303*** | -0.101 |
| Price Volatility t | 0.0685*** | -0.0208 |
| Profit of Trader t-1 | -6.55E-07 | -1.15E-05 |
| # of IMs Trader Exchanged t | -0.0588** | -0.0265 |
| Information Complexity—Instant Messages t | -3.967 | -3.732 |
| Information Complexity—News t | 0.0334** | -0.0138 |
| Sentiment—Instant Messages t | 0.214 | -0.146 |
| Sentiment—News t | -0.000398 | -0.000358 |
| Crash Fixed Effect | Yes | Yes |
| Day of Year Fixed Effect | Yes | Yes |
| Day of Week Fixed Effects | Yes | Yes |
| Trader Fixed Effects | Yes | Yes |
| Constant | 23.28** | -8.645 |
| R-squared | 0.67 |
*** p<0.01,
** p<0.05,
* p<0.1.