Coping With Risk and Uncertainty
Brett N. Steenbarger, Ph.D.
A version of this article was submitted to the Trading Markets site on 10/15/05
How do you cope with the risk and uncertainty that are built into markets, and are you
coping effectively? In this and my next article, I will be tackling these important
The topic of coping actually begins with the notion of stress. Stress is a characteristic set
of physiological, cognitive, and emotional responses to threat. Generally, these responses
speed up such bodily functions as heart rate, galvanic skin response, muscle tension, and
rate of respiration. For this reason, the stress response has sometimes been called the
"flight or fight" reaction. In the face of threat, our bodies prepare us for action: either to
attack the source of danger or to run from it.
What constitutes a source of stress is highly dependent upon our perception. If we define
something as a threat, we will experience it as threatening, and that will trigger a stress
response. For some people, public speaking is an everyday activity, not to be feared at
all. It might even be something enjoyable. Others view public speaking as a potentially
humiliating event. Their perception of threat triggers the stress response that we call
performance anxiety. Cognitive psychologists, however, remind us that it is not the
public speaking event itself that is generating the anxiety, but rather our processing of
that event. Take away the perception of threat and the anxiety diminishes.
Some of us view the world through lenses that emphasize the threat in life events.
Perhaps we grew up in an unstable home, perhaps we were overprotected and never
experienced life's hard knocks, or perhaps we learned to anticipate negative events as a
way of handling multiple setbacks during a difficult period of life. All of these scenarios
can lead to situations where stress becomes a way of life. Once we acquire habitual
thinking patterns that emphasize life's dangers, we fall into a chronic mode of flight or
fight. Continually mobilized, we can experience ongoing high blood pressure, muscle
tension, and jitteriness.
Psychologically, chronic stress is experienced as dis-stress. Anxiety, depression, and