Would daily stock volatility trigger you to buy more insurance? Or if you were a loan officer at a bank, approving long-term loans, would the stock market influence your decisions?
Tom Y. Chang and his colleagues investigated how Chinese insurance sales and bank loan approvals were influenced significantly by daily stock volatility. They found how 1 standard deviation in daily volatility had a significant (5-6%) influence in both of these activities.
If you asked those professional bankers or the people who purchased those policies, I’m sure that they would agree that this is absurd. And yet, even without their conscious knowledge or will, the emotions they feel as they follow stock performance spills into other important decisions in their lives. Psychologists call this phenomenon emotional spillover, and its influence is shown to be largely unconscious. In common speak, we also know them, quite loosely, as moods.
Our lives today is filled with stimulation – stock market performance, 24×7 breaking news, social media notifications and several other high frequency online updates. The surges and the troughs in the emotions they make us feel unconsciously and invariably spill into the other domains of our life.
Every notification brings with it a hidden emotional cost. The question we ought to be asking more frequently is if that cost is worth it?
