Drawing Parallels Between Finance and Psychology: A Psychology Metaphor

Question

This question starts out with some finance theory to set the scene:

Background

Let's consider the stock price of Google (the value of holding a share in Google). The volatility in Google's stock price is the degree of variation in that price. An implied volatility can be derived from the market price of an option.

An option is an instrument which gives the buyer a right to buy or sell a particular stock in the future at a particular price, if they want to. Volatility is one of the inputs required to price (determine the correct value) of an option. It is the range in which a a stock price is expected to fluctuate.

Organisations are often considered as organisms. Organic metaphors are often used to describe how organisations work.

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Question

If I was to use psychology to create a metaphor for volatility, what theory could I use?

If stock price is an individuals self worth or self esteem and an option price is their outlook on what their self worth might be at a point in the future. Finance theory would suggest that a correct view of future self worth would require something comparable to volatility.

Does it sound reasonable to consider volatility as emotional modulation? Emotional dysregulation at one end of the scale, a level head at the other? Is there a psychological term for level head?

Any good reading you would suggest to help me continue this comparison/analysis?

Answer 1

Classically, we might call emotional volatility neuroticism. We could also refer to a continuum of affective reactivity (high vs. low reactivity; e.g., Gross, Sutton, & Ketelaar, 1998).

Emotion dysregulation need not imply emotional volatility. For example, depressed patients show stable depressed mood or emotional inertia (Brose et al., 2014), which is related to impaired affective updating under stress (Pe et al., 2015) and perseverative thinking (Nolen-Hoeksema, Wisco, & Lyubomirsky, 2008).

A lot of these ideas can be pushed under the umbrella of affective dynamics, or how affect/emotions change over time (for recent theory, see this special issue of Emotion Review, 2015).

We can also say that fluctuations in affect represent deviations from allostasis (Sterling, 2013), which motivate us to engage in self-regulatory behaviors that bring us back to allostasis (Inzlicht, Bartholow, & Hirsch, 2015).

As part of a predictive regulation framework, emotional instability may result from feedback dynamics between positive and negative predictions about the world (Eldar et al., 2015; see the image below). Relatedly, maladaptive priors and associated attentional biases (i.e., inappropriately weighted prediction errors) may also account for volatility (Huys, Daw, & Dayan, 2015).