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BEING EMOTIONAL DURING DECISION MAKING-GOOD OR BAD? AN EMPIRICAL INVESTIGATION
Academy of Management Journal. Academy of Management
|May 2, 2008
Summary
Intense feelings correlate with better investment decisions, contrary to popular belief. Emotional awareness enhances decision-making by mitigating biases, leading to improved performance in financial simulations.
Area of Science:
- Behavioral Finance
- Cognitive Psychology
- Decision Science
Background:
- Traditional views often posit that emotions negatively impact rational decision-making.
- The role of affective experience in complex decision-making, particularly in finance, remains a subject of ongoing research.
- Understanding the interplay between emotion and cognition is crucial for optimizing performance in high-stakes environments.
Purpose of the Study:
- To investigate the relationship between affective experience and decision-making performance in a financial context.
- To determine if emotional intensity influences investment success.
- To explore whether emotional intelligence, specifically the ability to identify and differentiate feelings, moderates the effect of emotions on decision quality.
Main Methods:
- A stock investment simulation was conducted over 20 business days with 101 participants.
- Participants rated their affective states daily via an internet website concurrently with making investment decisions.
- Data on investment performance, emotional intensity, and emotional differentiation were collected and analyzed.
Main Results:
- Individuals reporting more intense affective experiences demonstrated higher decision-making performance.
- A positive correlation was observed between emotional intensity and investment success.
- Enhanced ability to identify and distinguish current feelings was associated with superior decision-making performance.
- Emotional differentiation mediated the positive impact of intense feelings on performance by improving bias control.
Conclusions:
- Contrary to conventional wisdom, intense affective experiences can be beneficial for decision-making performance in financial simulations.
- Emotional intelligence, particularly the capacity for nuanced emotional awareness and differentiation, plays a critical role in harnessing emotions for better decision outcomes.
- These findings suggest that fostering emotional awareness and regulation skills may enhance financial decision-making capabilities.
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