Coping With Risk and Uncertainty

Coping With Risk and Uncertainty - Coping With Risk and...

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Coping With Risk and Uncertainty Brett N. Steenbarger, Ph.D. Note: 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 questions. 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
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This note was uploaded on 08/11/2009 for the course FINANCE Fixed Inco taught by Professor Proflim during the Three '09 term at University of Adelaide.

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Coping With Risk and Uncertainty - Coping With Risk and...

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