Sleep Deprived Financial Traders Make Lower Stock Market Returns

Do financial traders make better returns in the stock market when they are well rested? You would intuitively assume that a trader’s level of sleep would affect their decision making.

Several studies have certainly shown that sleep affects the ability of people to make decisions in general. Though admittedly based on small samples of participants, these studies show that those who are short on sleep tend to have relatively low attention to detail, poor memory, poor performance and significant mood swings.

But when it comes to whether sleep affects financial decisions, the evidence has been mixed. The only measure of sleepiness that has been used is the annual clock changes for daylight saving that take place in many countries, since they disturb many people’s sleep. A few studies have used this to look at how stock market returns are affected on the Mondays directly after the clocks go back or forward by an hour.

One such study in 2000 concluded that returns were relatively low when traders lacked sleep, and suggested that the lack of sleep might make them more risk-averse because they were anxious and struggling to concentrate. But later studies, such as this one from 2002, suggested that the correlation between sleep and cautious investing might not be as strong empirically as initially thought.

My work

Daylight-saving time changes have the advantage that we all have to adjust them, but they are far from an ideal proxy for sleep since they only occur twice a year, and the impact on people’s sleep is relatively small since the clock only changes by an hour. This might explain why the research evidence has been mixed in this area.

To try and improve our understanding in this area, I undertook a pilot study of a fund manager in England, analysing his investment transactions in the context of sleep data that he recorded in a diary.

I found that his sleep patterns did indeed influence his investment decisions. In line with the theory from the 2000 study, the fund manager made fewer transactions when he was short on sleep.

To see whether there was a wider correlation, I sought to develop a new proxy for sleep. We know that around 80% of people search for information online about their health issues, and there is no reason to believe that investors behave any differently. I also knew that Google data has been used by researchers to measure investor attention to individual stocks.

I therefore created a sleepiness index based on the extent to which people in the US were searching Google for 28 relevant terms including “sleep deprivation”, “sleeping pills” and “jet lag cure”. Some of these terms came from allowing the Google algorithm to offer up potential sleepiness terms based on suggested autocompletes.

The more that people searched for things to do with sleepiness, the greater the indication of sleep difficulties. Unlike the time changes from daylight saving, my index has the advantage of being based on daily data, and can measure a much wider range of sleepiness. To test its validity, I checked the index against times that we would normally associate with sleepiness, including daylight-saving time changes and also sunrises and sunsets. Sure enough, sleepiness-related Google searches increase at these times.

The index confirmed that stock-market returns are indeed quite low on days that traders are short on sleep. For every 1% daily increase in sleep difficulties across the population, stock-market returns fell by 0.14%. I also found that these patterns reversed on subsequent days, which may mean that traders realise that their initial decisions were poor and take steps to correct them.

What next from a research point of view? Researchers could potentially use the data from sleep apps to get more accurate measures of the relationship between stock market returns and the population’s sleepiness over time. No doubt the better we understand this, the more that traders will be able to use it to their advantage.

My work is another example of how online search data can shed new light on old research subjects. There are surely lots of other ways in which the academic community can use it to understand other factors that influence our decisions.

By: Antonios Siganos  Senior Lecturer in Finance, University of Glasgow

Source: Sleep-deprived financial traders make lower stock market returns – new research

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How Far Is It To The Edge Of The Universe?

Artist's logarithmic scale conception of the observable universe. Galaxies give way to large-scale... [+] structure and the hot, dense plasma of the Big Bang at the outskirts. This 'edge' is a boundary only in time.

If you were to go as far out into space as you can imagine, what would you encounter? Would there be a limit to how far you could go, or could you travel a limitless distance? Would you eventually return to your starting point, or would you continue to traverse space that you had never encountered before? In other words, does the Universe have an edge, and if so, where is it?

Believe it or not, there are actually three different ways to think about this question, and each one has a different answer. If you consider how far you could go if you:

    • left today in an arbitrarily powerful rocket,
    • considered everything that could ever contact us or be contacted by us from the start of the hot Big Bang,
    • or used your imagination alone to access the entire Universe, including beyond what will ever be observable,

You can figure out how far it is to the edge. In each case, the answer is fascinating.

We often visualize space as a 3D grid, even though this is a frame-dependent oversimplification when... [+] we consider the concept of spacetime. In reality, spacetime is curved by the presence of matter-and-energy, and distances are not fixed but rather can evolve as the Universe expands or contracts.

ReunMedia / Storyblocks

The key concept to keep in mind is that space isn’t how we normally conceive of it. Conventionally, we think about space as being like a coordinate system — a three-dimensional grid — where the shortest distance between two points is a straight line, and where distances don’t change over time.

But both of those assumptions, so thoroughly good in our everyday lives, fail spectacularly when we begin looking at the larger-scale Universe beyond our own planet. For starters, the idea that the shortest distance between two points is a straight line falls apart as soon as you start introducing masses and energetic quanta into your Universe. Because spacetime is subject to curvature, which the presence of matter and energy is the cause of, the shortest distance between two points is inherently dependent on the shape of the Universe between those points.

Instead of an empty, blank, three-dimensional grid, putting a mass down causes what would have been... [+] 'straight' lines to instead become curved by a specific amount. In General Relativity, we treat space and time as continuous, but all forms of energy, including but not limited to mass, contribute to spacetime curvature. If we were to replace Earth with a denser version, up to and including a singularity, the spacetime deformation shown here would be identical; only inside the Earth itself would a difference be notable.

Christopher Vitale of Networkologies and the Pratt Institute

In addition to that, the fabric of spacetime itself does not remain static over time. In a Universe filled with matter and energy, a static, unchanging Universe (where distances between points remain the same over time) is inherently unstable; the Universe must evolve by either expanding or contracting. If Einstein’s General theory of Relativity is correct, this is mandatory.

Observationally, the evidence that our Universe is expanding is overwhelming: a spectacular validation for Einstein’s predictions. But this carries with it a series of consequences for objects separated by cosmic distances, including that the distance between them expands over time. Today, the most distant objects we can see are more than 30 billion light-years away, despite the fact that only 13.8 billion years have passed since the Big Bang.

The farther a galaxy is, the faster it expands away from us and the more its light appears... [+] redshifted. A galaxy moving with the expanding Universe will be even a greater number of light years away, today, than the number of years (multiplied by the speed of light) that it took the light emitted from it to reach us. But we can only understand redshifts and blueshifts if we attribute them to a combination of motion (special relativistic) and the expanding fabric of space (general relativistic) contributions both.

Larry McNish of RASC Calgary Center

When we measure how distant a variety of objects are from their physical and luminous properties — along with the amount that their light has been shifted by the Universe’s expansion — we can come to understand what the Universe is made of. Our cosmic cocktail, at present, consists of:

  • 0.01% radiation in the form of photons,
  • 0.1% neutrinos, an elusive, low-mass particle almost as numerous as photons,
  • 4.9% normal matter, made mostly of the same stuff we are: protons, neutrons, and electrons,
  • 27% dark matter, an unknown substance that gravitates but neither emits nor absorbs light,
  • and 68% dark energy, which is the energy inherent to space that causes distant objects to accelerate in their recession from us.

When you combine these effects together, you get a unique and unambiguous prediction for how far it is, at all times past and present, to the edge of the observable Universe.

A graph of the size/scale of the observable Universe vs. the passage of cosmic time. This is... [+] displayed on a log-log scale, with a few major size/time milestones identified. Note the early radiation-dominated era, the recent matter-dominated era, and the current-and-future exponentially-expanding era.

E. Siegel

This is a big deal! Most people assume that if the Universe has been around for 13.8 billion years since the Big Bang, then the limit to how far we can see will be 13.8 billion light-years, but that’s not quite right.

Only if the Universe were static and not expanding would this be true, but the fact is this: the farther away we look, the faster distant objects appear to speed away from us. The rate of that expansion changes in a way that is predictable based on what’s in the Universe, and in turn, knowing what’s in the Universe and observing how fast objects expand tells us how far away they are. When we take all of the available data together, we arrive at a unique value for everything together, including the distance to the observable cosmic horizon: 46.1 billion light-years.

The observable Universe might be 46 billion light years in all directions from our point of view,... [+] but there's certainly more, unobservable Universe, perhaps even an infinite amount, just like ours beyond that. Over time, we'll be able to see more of it, eventually revealing approximately 2.3 times as many galaxies as we can presently view.

Frédéric MICHEL and Andrew Z. Colvin, annotated by E. Siegel

This boundary, however, is not an “edge” to the Universe in any conventional sense of the word. It is not a boundary in space at all; if we happened to be located at any other point in space, we would still be able to detect and observe everything around us within that 46.1 billion light-year sphere centered on us.

This is because that “edge” is a boundary in time, rather than in space. This edge represents the limit of what we can see because the speed of light — even in an expanding Universe governed by General Relativity — only allows signals to travel so far over the Universe’s 13.8 billion year history. This distance is farther than 13.8 billion light-years because of the Universe’s expansion, but it’s still finite. However, we cannot reach all of it.

The size of our visible Universe (yellow), along with the amount we can reach (magenta). If we... [+] accelerated at 9.8 m/s^2 for approximately 22.5 years and then turned around and decelerated for another 22.5 years, we could reach any galaxy within the magenta circle, even in a Universe with dark energy, but nothing outside of it.

E. Siegel, based on work by Wikimedia Commons users Azcolvin 429 and Frédéric MICHEL

Beyond a certain distance, we can see some of the light that was already emitted long ago, but will never see the light that is being emitted right now: 13.8 billion years after the Big Bang. Beyond a certain specific distance — calculated (by me) to be approximately 18 billion light-years away at present — even a signal moving at the speed of light will never reach us.

Similarly, that means that if we were in an arbitrarily high-powered rocket ship, all of the objects presently contained within this 18 billion light-year radius would be eventually reachable by us, even as the Universe continued to expand and these distances continued to increase. However, the objects beyond that would never be reachable. Even as we achieved greater and greater distances, they would recede faster than we could ever travel, preventing us from visiting them for all eternity. Already, 94% of all the galaxies in the observable Universe are beyond our eternal reach.

As vast as our observable Universe is and as much as we can see, it’s far more than we can ever... [+] reach, as only 6% of the volume that we can observe is presently reachable. Beyond what we can observe, however, there is certainly more Universe; what we can see represents only a tiny fraction of what must be out there.

NASA, ESA, R. Windhorst, S. Cohen, and M. Mechtley (ASU), R. O’Connell (UVa), P. McCarthy (Carnegie Obs), N. Hathi (UC Riverside), R. Ryan (UC Davis), & H. Yan (tOSU)

And yet, there is a different “edge” that we might want to consider: beyond the limits of what we can observe today, or even what we can potentially observe arbitrarily far into the future, if we run our theoretical clock towards infinity. We can consider how large the entire Universe is — the unobservable Universe — and whether it folds in on itself or not.

The way we can answer this is based on an extrapolation of what we observe when we try to measure the spatial curvature of the Universe: the amount that space is curved on the largest scale we can possibly observe. If the Universe is positively curved, parallel lines will converge and the three angles of a triangle will sum to more than 180 degrees. If the Universe is negatively curved, parallel lines will diverge and the three angles of a triangle will sum to less than 180 degrees. And if the Universe is flat, parallel lines will remain parallel, and all triangles will contain 180 degrees exactly.

The angles of a triangle add up to different amounts depending on the spatial curvature present. A... [+] positively curved (top), negatively curved (middle), or flat (bottom) Universe will have the internal angles of a triangle sum up to more, less, or exactly equal to 180 degrees, respectively.

NASA / WMAP science team

The way we do this is to take the most distant signals of all, such as the light that’s left over from the Big Bang, and examine in detail how the fluctuations are patterned. If the Universe is curved in either a positive or a negative direction, the fluctuation patterns that we observe will wind up distorted to appear on either larger or smaller angular scales, as opposed to a flat Universe.

When we take the best data available, which comes from both the cosmic microwave background’s fluctuations and the details of how galaxies cluster together on large scales at a variety of distances, we arrive at an inescapable conclusion: the Universe is indistinguishable from perfect spatial flatness. If it is curved, it’s at a level that’s no more than 0.4%, meaning that if the Universe is curved like a hypersphere, its radius is at least ~250 times larger than the part that’s observable to us.

The magnitudes of the hot and cold spots, as well as their scales, indicate the curvature of the... [+] Universe. To the best of our capabilities, we measure it to be perfectly flat. Baryon acoustic oscillations and the CMB, together, provide the best methods of constraining this, down to a combined precision of 0.4%.

Smoot Cosmology Group / LBL

If you define the edge of the Universe as the farthest object we could ever reach if we began our journey immediately, then our present limit is a mere distance of 18 billion light-years, encompassing just 6% of the volume of our observable Universe. If you define it as the limit of what we can observe a signal from — who we can see and who can see us — then the edge goes out to 46.1 billion light-years. But if you define it as the limits of the unobservable Universe, the only limit we have is that it’s at least 11,500 billion light-years in size, and it could be even larger.

This doesn’t necessarily mean that the Universe is infinite, though. It could be flat and still curve back on itself, with a donut-like shape known mathematically as a torus. As large and expansive as the observable Universe is, it’s still finite, with a finite amount of information to teach us. Beyond that, the ultimate cosmic truths still remain unknown to us.

In a hypertorus model of the Universe, motion in a straight line will return you to your original... [+] location, even in an uncurved (flat) spacetime. The Universe could also be closed and positively curved: like a hypersphere.

ESO and deviantART user InTheStarlightGarden

Follow me on Twitter. Check out my website or some of my other work here.

Ethan Siegel Ethan Siegel

I am a Ph.D. astrophysicist, author, and science communicator, who professes physics and astronomy at various colleges. I have won numerous awards for science writing since 2008 for my blog, Starts With A Bang, including the award for best science blog by the Institute of Physics. My two books, Treknology: The Science of Star Trek from Tricorders to Warp Drive, Beyond the Galaxy: How humanity looked beyond our Milky Way and discovered the entire Universe, are available for purchase at Amazon. Follow me on Twitter @startswithabang.

Source: How Far Is It To The Edge Of The Universe?

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