Literature Review

The disaster in subprime mortgages, the recent financial crisis and the numerous hedge funds that have been out of business show us that the markets are continuously changing and are highly volatile and unpredictable. Few professions have to deal with such routine exposure to uncertainty and risk and traders are part of them: they experience stress in their daily life.
Since the 20th century, many definitions and theories emerged about stress (Cooper and Dewe, 2004). In order to have a better understanding about the term “stress” nowadays, it can be defined from an organizational behavior outlook as “a person’s adaptive response to a stimulus that places excessive psychological or physical demands on him or her” (Moorhead and Griffin, 2010).
The Institute for Social Research model highlights researches and enquiries at the work place and points out that stress is a multistage process (Jex and Beehr, 1991). The stress process has been extensively analyzed before by Dr. Hans Selye (1956) with its pioneering work on General Adaptation Syndrome where he identifies three stages of response to a stressor: alarm, resistance, and exhaustion. He analyzes stress more from a physiological and biological perspective than from a psychological one (Martin, 1984).
Applied to traders – an operator market in speculation (Vernimenn et al. 2010), the Efficient Market Hypothesis theory (Fama, 1993) stipulates that traders only take rational decisions and reject all kind of emotions. However, given certain stock market anomalies, a new theory combining emotion and rationality has emerged (Lo and Repin, 2002) called the Adaptive Market Hypothesis. Consequently the decision making process of traders is affected by various emotions such as stress. This idea on emotional aspects in trading was confirmed and extended by Lo et al. in 2005.
Trading stress has recently been more studied consequently to the financial crisis which has shown further causes and