Hello Krishna,

Very interesting ideas. My own belief is that volatility is not risk; see our forthcoming part four of this series. Volatility of security price is capturing short-term emotions on the part of investors and price adjustments to new information.

However, if advisers seem wedded to wanting to truly understand the emotional profile of their clients then there are solutions just waiting to be developed using off-the-shelf brain monitors, such as that offered by Muse. This headband could be adapted using an application that puts people in scenarios where their assets fluctuate wildly, or where they read about events that commonly affect portfolio value.

The approach you suggest is also valid, and interesting. Search here on The Enterprising Investor for Essentia Analytics and/or Claire Flynn-Levy. Her company examines past trading data for behavioral bias and errors and creates alerts in real time for investors. Note: this would work for advisers, prop traders, investment company traders, and others, too.

We are just at the very beginnings of meaningful conversations about emotions, volatility, and actual risk. Let's keep the conversation happening!

Yours, in service,

Jason