The Lo-down on trading

What really makes traders sweat? Financial engineering guru Andrew Lo wants to find out.

Working with Boston University neuroscientist Dmitry Repin earlier this year, Lo attached skin sensors to ten foreign exchange and interest rate derivatives traders: He wanted to measure changes in physiological characteristics like temperature and respiration over the course of a trading day. (Lo won’t reveal the identity of the firm, a major Boston financial institution.) A renowned econometrician and head of MIT’s financial engineering program - who also runs a hedge fund backed by quantitative investing pioneer Donald Sussman - Lo hopes someday to understand the neurological hardwiring behind financial decision making. He plans to publish the results of his study in The Journal of Cognitive Neuroscience. Meanwhile, MIT is applying for a patent on Lo’s methodology, and the professor is negotiating to conduct even more elaborate experiments at a Chicago trading firm. “It could be very valuable,” says Lo. “The sci-fi version is that you could use it to screen for trading talent some day.”