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Interoceptive Ability Predicts Survival on a London Trading Floor

A 2016 field study reporting that heartbeat detection ability among high-frequency financial traders was associated with profitability and length of survival in the markets.

Pdf · Article · Narayanan Kandasamy, Sarah N. Garfinkel, Lionel Page, Ben Hardy, Hugo D. Critchley, Mark Gurnell, John M. Coates · Nature Publishing Group · 2016-09-19 · 7 pages

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Nature Publishing Group · 2016-09-19

Interoceptive Ability Predicts Survival on a London Trading Floor is a field study of interoception, which the source defines as sensing physiological signals originating inside the body.¹ According to the source, Narayanan Kandasamy, Sarah N. Garfinkel, Lionel Page, Ben Hardy, Hugo D. Critchley, Mark Gurnell and John M. Coates quantified heartbeat detection skills among traders working on a United Kingdom, England, London trading floor.² The study recruited 18 male traders engaged in high-frequency trading; they bought and sold futures contracts and held positions for seconds or minutes, or at most a few hours.³⁴ Its central method was the heartbeat detection task, assessed through two procedures.⁵ In the counting task, participants silently counted perceived heartbeats during brief intervals, while pulse oximetry recorded the actual number of beats for comparison.⁶⁷ In the second procedure, they judged whether ten auditory tones were synchronised with their heartbeats or delayed relative to them, completing 15 trials.⁸⁹ Results were compared with 48 age-matched, non-trading male controls drawn from studies at the University of Sussex.¹⁰

According to the source, traders had a higher mean heartbeat-counting score than controls: 78.2 compared with 66.9.¹¹ Within the trader sample, heartbeat-counting scores predicted profit and loss, and also predicted the number of years a trader had survived in the market.¹²¹³ Model selection produced a model containing heartbeat detection score and RMSSD, a measure of heart-rate variability, that explained 45.4% of the variance in P&L; the corresponding model for years of survival explained 60.5% of the variance.¹⁴¹⁵ The source also reports that the physiological variables associated with heartbeat detection included heart rate, heart-rate variability and body mass index. It explicitly states that, because the work was conducted in the field, it could not establish causation.¹⁶

The study places these results within the somatic marker hypothesis, citing Antoine Bechara and Antonio Damasio’s account of physiological changes accompanying risky choices on the Iowa Gambling Task.¹⁷ According to the source, such bodily signals can feed back on the brain and bias decisions, including before a person can articulate the reasons for a choice; it also discusses impaired bodily-decision coupling following ventromedial prefrontal-cortex damage.¹⁸¹⁹²⁰ The authors describe the findings as anomalous data for the Efficient Markets Hypothesis, particularly its strong version, which treats market performance as unaffected by individual traits or skills.²¹²² Their interpretation shifts attention towards physiological factors in financial decision-making, while the study’s observational design leaves alternative explanations open.²³

References (24)

The source defines interoception as sensing physiological signals from inside the body.
“Interoception is the sensing of physiological signals originating inside the body, such as hunger, pain and heart rate.”
Interoceptive Ability Predicts Survival on a London Trading Floor char:298-412
The named researchers quantified heartbeat detection skills among financial traders.
“Here, we report on a study in which we quantified heartbeat detection skills in a group of financial traders working on a London trading floor.”
Interoceptive Ability Predicts Survival on a London Trading Floor char:746-883
The study recruited 18 male high-frequency traders.
“We recruited 18 male traders engaged in high frequency trading.”
Interoceptive Ability Predicts Survival on a London Trading Floor char:4965-5020
The traders bought and sold futures contracts and held positions briefly.
“What that means is that they bought and sold futures contracts but held their trading positions for only a short period of time, seconds or minutes, a few hours at the most.”
Interoceptive Ability Predicts Survival on a London Trading Floor char:5029-5197
The researchers used two established heartbeat detection tasks.
“We measured individual differences in each trader's capacity to detect interoceptive signals - i.e. the changes, often subtle, in the physiological state of their bodies – by means of two established heartbeat detection tasks.”
Interoceptive Ability Predicts Survival on a London Trading Floor char:6275-6495
The heartbeat counting task required participants to count perceived beats silently.
“Each trader first performed a heartbeat counting task, in which he was instructed to silently count, without touching chest or any pulse point, how many heartbeats he felt over brief time intervals.”
Interoceptive Ability Predicts Survival on a London Trading Floor char:6593-6781
Perceived beats were compared with pulse-oximetry measurements.
“The number of heartbeats perceived by the trader within each time period was compared with the actual number of heartbeats, as recorded over that interval objectively and non-invasively by pulse oximetry.”
Interoceptive Ability Predicts Survival on a London Trading Floor char:6903-7098
The second task required judgements about tones synchronised with or delayed from heartbeats.
“In the second heartbeat detection task traders were asked to judge if a series of ten auditory tones was played synchronously with, or delayed relative to, their own heartbeats.”
Interoceptive Ability Predicts Survival on a London Trading Floor char:7861-8027
Each trader completed 15 synchronisation trials.
“Each trader performed 15 trials of this task. Their score was the percentage of right answers.”
Interoceptive Ability Predicts Survival on a London Trading Floor char:8365-8451
The comparison group comprised 48 age-matched non-trading males.
“Comparative data from a control group of 48 high-functioning (mostly students and postgraduates) non-trader males, matched with traders on age, were drawn from participants who had performed identical interoceptive tests (same equipment and procedures) in studies undertaken at the University of Sussex”
Interoceptive Ability Predicts Survival on a London Trading Floor char:8831-9127
Traders had a higher mean heartbeat-counting score than controls.
“We found that the traders had significantly higher scores, indicating greater interoceptive accuracy, than the controls, with a mean score of 78.2 for traders and 66.9 for controls (p=0.011, N=66, Fig. 1).”
Interoceptive Ability Predicts Survival on a London Trading Floor char:10132-10334
Heartbeat-counting scores predicted profit and loss.
“We found that the traders' scores on the heartbeat counting task predicted their P&L (coeff=2.61, R2=0.27, p=0.007, N=16).”
Interoceptive Ability Predicts Survival on a London Trading Floor char:10883-11001
Heartbeat-counting scores predicted years of trading survival.
“To answer this question we plotted heartbeat detection scores against years of experience in the financial markets and found that a trader's heartbeat counting score predicted the number of years he had survived as a trader (coeff=21.64, R2=0.344, p=0.001, N=18, Fig. 3).”
Interoceptive Ability Predicts Survival on a London Trading Floor char:11490-11758
A model including heartbeat detection and RMSSD explained 45.4% of P&L variance.
“P&L was best predicted by a model which included heart beat detection and a single physiological variable, heart rate variability: R2=45.4%, p=0.008”
Interoceptive Ability Predicts Survival on a London Trading Floor char:20130-20275
A model including heartbeat detection and RMSSD explained 60.5% of survival-year variance.
“Years of survival was predicted by the same two variables: R2= 60.5%, p= 0.001”
Interoceptive Ability Predicts Survival on a London Trading Floor char:20338-20413
The field study could not establish causation.
“Our study, being field work, could not establish causation.”
Interoceptive Ability Predicts Survival on a London Trading Floor char:22215-22264
Bechara and Damasio associated physiological changes during risky Iowa Gambling Task choices with somatic markers.
“Antoine Bechara and Antonio Damasio have observed that high-risk choices made on the Iowa Gambling Task are accompanied by rapid and subtle physiological changes – for example, sympathetic skin response - which they call 'somatic markers'.”
Interoceptive Ability Predicts Survival on a London Trading Floor char:2277-2507
The source describes somatic markers as feeding back on the brain and biasing decisions.
“Such autonomic responses feedback on the brain to bias our decisions, steering us away from gambles with negative expected returns and towards ones with positive expected returns.”
Interoceptive Ability Predicts Survival on a London Trading Floor char:2517-2688
People may make optimal gambling decisions before articulating their reasons.
“People can generate somatic markers and make optimal decisions on gambling tasks before they are able to articulate the reasons for their decisions.”
Interoceptive Ability Predicts Survival on a London Trading Floor char:2697-2835
Damage to the ventromedial prefrontal cortex was associated with impaired coupling of bodily arousal and decisions.
“For example, patients with damage to the ventromedial prefrontal cortex can lose the coupling of bodily arousal with decisions; and even though they maintain normal intellect they suffer a recurrent failure to learn from negative feedback.”
Interoceptive Ability Predicts Survival on a London Trading Floor char:3008-3238
The authors describe their findings as anomalous data for the Efficient Markets Hypothesis.
“Our findings present anomalous data for the influential Efficient Markets Hypothesis of economic theory.”
Interoceptive Ability Predicts Survival on a London Trading Floor char:24981-25078
Strong versions of the Efficient Markets Hypothesis treat the market as random.
“According to strong versions of this hypothesis, the market is random, meaning that no trait or skill of an investor or trader – not their IQ, education, nor training - can improve their performance, any more than these traits and skills could improve their performance at flipping coins.”
Interoceptive Ability Predicts Survival on a London Trading Floor char:25086-25368
The authors state that traders' physiological state affects success and survival.
“We find on the contrary that the physiological state of traders does have large effects on their success and survival.”
Interoceptive Ability Predicts Survival on a London Trading Floor char:25375-25484
The authors propose greater attention to physiological rather than solely psychological traits.
“Such a finding has profound implications for the understanding of financial markets, specifically by reorienting attention away from risk takers' psychological traits towards their physiological ones.”
Interoceptive Ability Predicts Survival on a London Trading Floor char:25494-25689

Interoceptive Ability Predicts Survival on a London Trading Floor

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