Emotion regulation

Emotion regulation refers to the processes by which we influence which emotions we have, when we have them, and how we experience and express them (Gross, 1998b).). Emotion regulation can manifest itself in explicit ways. For instance, people may rapidly shift their attention away from threatening stimuli (Langens & Morth, 2003), or overcome traumatic experiences by writing about them (Pennebaker & Chung, 2007), and that people may choose to hit a pillow instead of lashing out at the true cause of their anger (Bushman et al., 2001).

Emotion regulation strategies

Gross (2001; Gross & Thompson, 2007), distinguishes a series of different stages in emotion episodes and five associated emotion regulation strategies. These are summarized in figure below.

Source: (Gross & Thompson, 2007: p10)

Each of these has been elaborated by Gross (2001 and 2002; Gross & Thompson, 2007). Particular attention has been paid in recent research to the difference in outcomes between antecedent focused-emotion regulation strategies, which seek to change emotions before emotion responses have become fully activated and response-focused regulation strategies, which modify behavior and emotion expression once the emotion response is underway.

Reappraisal is an antecedent-focused strategy that occurs early, and intervenes before the emotion response tendencies have been fully generated. Suppression is a response-focused strategy, which comes relatively late in the emotion-generative process, and primarily modifies the behavioral aspect of the emotion response tendencies. Suppression is cognitively more taxing than reappraisal (Gross, 2002; Gross & John, 2003).

Emotion regulation and financial decision-making

There is also some evidence on emotion regulation and financial decision-making. In their study of investors, Seo and Barret (2007) found that investors who were better able to regulate the influence of feelings on their decision-making achieved superior performance. In their work on traders, Fenton O’Creevy et al (2008) explicitly examine the different approaches to emotion regulation between novice traders and both high and low performing experienced traders. They investigate the relationship between traders’ emotion regulation strategies and their performance and found effective emotion regulation to be a critical success factor in trading. In particular, higher performers are more inclined to regulate emotions through attentional deployment and cognitive change and may display a willingness to cope with negative feelings in the interests of maintaining objectivity and pursuing longer-term goals. In contrast, less expert traders engage either in avoidant behaviors (such as walking away from the desk) or invest significant cognitive effort in modulating their emotional responses. While an individual’s preferred approach to emotion regulation is likely to be influenced by personality traits, neuroticism and extroversion in particular (Gross & John, 2003), the interviews with traders and their managers (Fenton O’Creevy et al., 2008) also point to the importance of traders’ learned strategies for emotion regulation. The study, importantly, suggests that defensive emotion regulation strategies, which focus on avoidance or response suppression may be problematic because they reduce opportunities to exercise expert intuition.