Running Head: WORKING MEMORY AND E*TRADE MOBILE PRO

Working Memory, Anxiety, and E*TRADE MOBILE PRO Armen J. Chakmakjian Bentley University

WORKING MEMORY AND E*TRADE MOBILE PRO Abstract Trading investment vehicles such as stocks and bonds has moved from paper-based research and voice over landline phone to the mobile smart device. This disintermediation of information retrieval and transaction execution has created the ability for the average consumer to act on their investments with increasing ease and speed. This paper studies the working memory load that is required to act on the goals of an investor using the iPad application called E*TRADE MOBILE PRO. This paper first describes working memory in relation to the other perceptual and cognitive functions. Aspects of working memory such as the visual and phonological loops, as well as the concept of the central executive and episodic buffer are touched upon. The research then attempts to intuit the ease or difficulty that a novice investor encounters when using the iPad application to perform research and to execute a trade. Each action is evaluated in the context of working memory looking for areas where working memory capacity and emotional load would exacerbate pre-existing anxiety or create it. The paper concludes that the application is powerful but creates a high cognitive load on a novice investor and possibly exacerbates any anxiety they may already have.

2

WORKING MEMORY AND E*TRADE MOBILE PRO Working Memory and E*TRADE MOBILE PRO Trading investment vehicles such as stocks and bonds has moved from paper-based research and voice over landline phone to the mobile smart device. This disintermediation of information retrieval and transaction execution has created the ability for the average consumer to act on their investments with increasing ease and speed. This paper studies the working memory load that is required to act on the goals of an investor using the iPad application called E*TRADE MOBILE PRO. In order to perform a complex set of actions such as trading equity shares based on research, an investor relies on the perceptual and cognitive capabilities that have evolved in humans. In particular, an investor uses working memory to make decisions and execute against their goal of buying or selling shares. Applications such as the E*TRADE app present an interesting cognitive and emotional load on an investor, especially to novice investors who are presented with all the tools and information in one place. This paper first describes working memory in relation to the other perceptual and cognitive functions. Aspects of working memory such as the visual and phonological loops, as well as the concept of the central executive and episodic buffer are touched upon. The research then attempts to intuit the ease or difficulty for a novice investor presented with the iPad application to perform research and to execute a trade. Each action is evaluated in the context of working memory looking for areas where working memory capacity and emotional load would exacerbate pre-existing anxiety or create it. The paper concludes that the application is powerful but creates a high cognitive load on a novice investor and possibly exacerbates any anxiety they may already have. Working Memory Baddeley’s described his working memory model in 1974. In that model working memory sits between sensory memory and long-term memory. Baddeley proposes a limited capacity “work space” which has two components, storage and processing. (Baddeley & Hitch, 1974) Within that description Baddeley posits that there is also a visual sketchpad and a phonological loop that interact through a central executive. (Baddeley, 2000) Neurological research has shown the central executive function in action. When two tasks were attempted at the same time, different parts of the brain (depending on task) were activated in order to help with

3

Figure 1: Baddeley's model of working memory (Baddeley, 2000)

WORKING MEMORY AND E*TRADE MOBILE PRO the processing whereas those same parts of the brain were not activated when only one task was attempted. (D’Esposito, Detre, Alsop, Shin et al., 1995) The fact that the brain activates other parts of the brain as a part of load balancing means that the brain is somehow manipulating limited resources. Research indicates that there is a trade-off between the amount of storage required and the speed of processing and also shows that slow or error-prone processing tends to use up resources otherwise available for tasks. (Baddeley & Hitch, 1986, Just & Carpenter, 1992) Baddeley proposes that there is an episodic component to working memory that works along with the visual and phonological and central executive. (Figure 1) It is described as a limited-capacity cache that integrates information from various sources. The episodic buffer is controlled by the central executive to exchange information in both directions with long-term memory as a part of keeping track of the execution progress of plans against goals. (Baddeley, 2000, Conway, 2001) Mental models, also known as cognitive chunks, play a role in this episodic processing. The episodic buffer is where cognitive chunks are formed or modified and can be recalled into working memory later for attentive processing. (Jeffries, Lambon Ralph & Baddeley, 2004, Rapp, 2005) Working memory is constrained by the fact that it is a limited resource and not everything perceived and processed is stored. Research has indicated that visual working memory stores integrated objects, where both color and orientation are stored, in a limited fashion. This research showed that up to 4 colors were stored for an object even if the object was more colorful. (Luck & Vogel, 1997) Other research shows that children rely primarily on visual working memory to process, but adolescents and adults seem to dual-encode visual and phonological information, and in fact rely on phonological recall more. (Hitch, Woodin & Baker, 1989) However, external issues may also hamper working memory functioning. A 2006 study showed that anxiety selectively disrupts the visuospatial loop in particular, while leaving the phonological loop untouched. (Shackman et al., 2006). The visuospatial loop is tied to math ability and studies show that test performance, a specific use of working memory, is inhibited by stereotype threat and math anxiety in general. (Ashcraft & Kirk, 2001, Schmader & Johns, 2003). Research shows that financial decision-making puts a significant load on working memory and specifically on prefrontal systems. Spinella, et al., show that the affect by any impairment in the frontal lobes may subject the individual to impulsivity and poor judgment and in particular with regards to purchasing and credit card debt. That impulsivity results anxiety and other health problems in the decision-maker. (Spinella, Yang & Lester, 2004, 2007). Anxiety in turn can constrain working memory by biasing the attentive response to an apparent source of a threat (Luu, Tucker & Derryberry, 1998). It is not difficult to extrapolate that the purchase of a stock may then be using the same brain circuitry, subject the decision to inherent impulsivity as well as being affected by anxiety.

4

WORKING MEMORY AND E*TRADE MOBILE PRO E*TRADE MOBILE PRO, Anxiety and Working Memory Figure 2 shows the entry point into the E*TRADE MOBILE PRO application for any user. For the purposes of this discussion we will be looking at the application from the point of view of a novice investor, with no frontal lobe impairment, who may be familiarizing themselves with stock trading. This research does not speculate how the user invested prior to the use of this application. The iPad application presents the user with rich visual perceptual information in the

5

Figure 2:ETRADE application on an iPad on initial invocation

form of colors and shapes. The user’s preattentive mechanism will begin to process the page by grouping objects for processing priming later functioning with information that pops out. The user’s attention may be drawn to the familiar television-like metaphor for CNBC streaming video and a graph of some major investing indexes. From a working memory point of view, the user may have one of two goals. They may either want to browse this screen to become familiar with it or try an action. They may be drawn to the large blue selection indicator for the articles. At the edges of the visual field they will also see what appear to be occluded sections of information. Assuming that they are familiar with swiping on an iPad, they will swipe right or left to expose more information. While some of this data is potentially interesting, the user will process the generic nature of the information presented and conclude that it is not specific to them. To some extent this may be distracting if their goal is to get to their own information. Search for Personal Information The user will probably attempt want to authenticate their session at this point. They will search the visual field for any indication that they can log in. At the bottom left they may notice a key, a familiar metaphor for unlocking something, and the words “Log on”. The combination of text and the icon will create a powerful pair of inputs to working memory in the visual loop. Research studies that even though this text is presented visually, familiarity with words uses both the visual and phonological loops through the process of subvocalization in silent reading. (Daneman & Newson, 1992). The icon and text pair takes advantage of both the visual/spatial loop and phonological loop pairing words and icons.

WORKING MEMORY AND E*TRADE MOBILE PRO The user will authenticate using the username and password that they previously set up, which they stored electronically (such as in an email) or written down, or just from memory. Remembering this information or where they kept may cause some anxiety or not. When successful they will be presented with what appears to be exactly the same screen. This may be a bit disconcerting the user. With a quick scan the user will see that the key has now turned into a lock and “delayed quotes” at the top changed to “real time quotes”. Along the bottom they see the “Accounts” icon in the form of a folder. They may intuit at this point that this is where their information is. Clicking on that icon moves things on the screen such that their portfolios and accounts are visible including recent alerts. Researching Financial Information As Spinella, et al., point out, financial decision-making in healthy individuals brings with it a cognitive load laced with the emotional results of reward and punishment. (Spinella, Yang & Lester, 2004) That reward or punishment would be gain or loss based on an investment decision whether executed or inhibited. At this point the user is looking at a listing of their account information including their portfolio(s) and can see the overall value of their assets. For the purposes of this discussion, it is assumed that a trade will have to be done with existing assets. The user can see the overall gain for each portfolio and depending on the previous activity in this account this screen can be filled with a significant amount of financial and mathematical information to process, such as which portfolios have had the best or worst returns including losses. This data will likely strobe any anxiety or euphoria based on the results of previous actions. If the user taps on a particular portfolio, the screen updates to show two new boxes in the carousel at the top, one with the portfolio performance that day as well as a chart for one of the stocks in the portfolio. This is rich visual data for an expert with the ability to consume it in large spans or chunks. For a novice or anxious investor, the data on this screen can be overwhelming. Kalyuga, et al., showed in their research that split-attention presentation of text and graphical data requiring the user to relate what appears to be disparate information requires significant working memory that may inhibit the learning process by reducing available working memory for schema acquisition. (Kalyuga, Chandler & Sweller, 1999). In other words, the novice investor is dealing with lots of data in small chunks that can create a high cognitive load. The user can flick the carousel right and left and find cells for each of the investments in that portfolio as well as charts and news tickers for markets that day. Assuming they have an investment that they need to sell in order to have funds to buy a different investment they have in mind, they might fathom to do research. The presented information is somewhat limited. However at the bottom of the screen there is a research icon next to the accounts icon. The affordance is a chart, which could mean more charts, or other information.

6

WORKING MEMORY AND E*TRADE MOBILE PRO Assuming for a moment that the user has zeroed in on the data that convinces them that they should sell a stock that has done well for them, they might want to investigate a stock that they do not own but for which they have some previous information from. They must now figure out how to get information about that hunch or stock tip that validates or disproves it. The ETRADE program doesn’t provide a search function for information on a stock, but it does provide a “Get Quotes” box at the bottom. The user will type in a stock name or ticker in that cell and the screen will update the upper and lower carousels to present information about that stock. At the top left, a graph of the stocks performance, at the top right, immediate stock data such as recent bid/ask prices, 52 week high and lows, and the current price. The lower carousel has news stories relevant to that stock. Again this is a lot of rich information to consume and process along the whole perceptual and cognitive systems. Possible Confirmation Bias To some extent, because the user is dealing with an emotional topic such as a financial transaction, they may also be subject to confirmation bias. In this particular case, the amount of cognitive load, combined with any existing anxiety, may cause a user to make a decision based on the data provided that confirms their hunch or the tip they were provided. One research study shows that selective exposure to information that is presented in a sequential fashion may lead to confirmation bias. (Jonas, Schulz-Hardt, Frey & Thelen, 2001) It can be extrapolated that in this case the possible overload of information in ETRADE in concert with a set of articles that is walked through sequentially might lead to a novice customer to confirm their hunch, shortcircuiting any metacognitive checking that might be brought to bear on the decision. Executing Transactions At this point the user has confirmed that they should trade one stock for another. In both the sell and buy scenarios, tapping the “Trading” icon at the bottom of the page starts the transaction. An overlay appears (See figure 3) which allows them to pick an order type, a stock and several other parameters. As soon as the stock ticker symbol is typed in, the screen is updated

7

Figure 3: Order and Preview Overlays

WORKING MEMORY AND E*TRADE MOBILE PRO with a real time quote. Once the parameters of a transaction are entered, a green button encourages the user to preview the transaction. On the preview screen, the user is allowed to review the data and then possibly edit it. The researcher in this case did not execute the transaction to buy one share of GM, but in all likelihood a similar pop-up would appear which would confirm the order and let the user know if the order had been executed yet. Buying and selling of equities uses the same set of affordances and is part of the same flow. Within seconds of making the decision to execute the transaction the user would be able to both buy and sell stocks. Of all the information presented thus far, this seemed to be the most logical, learnable and somewhat free of confusion and load. Summary and Conclusion This paper first described working memory in relation to the other perceptual and cognitive functions. It briefly touched on aspects of working memory such as the visual and phonological loops, the central executive and the newer concept of episodic buffer. The research then turned to the specific example of a novice investor presented with the ETRADE iPad application and how they would perform research and then execute a trade. The conclusions presented were that this application would create a great amount of cognitive load for the user based on its design and the information provided. Exacerbating this would be any intrinsic anxiety that accompanies financial transactions for a novice investor. Finally the paper concluded that the least cognitive load and anxiety provoking part of the design application was executing the transaction itself.

8

WORKING MEMORY AND E*TRADE MOBILE PRO References Ashcraft, M. H., & Kirk, E. P. (2001). The relationships among working memory, math anxiety, and performance. Journal of Experimental Psychology: General, 130(2), 224. Baddeley, A. D., & Hitch, G. J. (1974). Working memory. Baddeley, A. D., & Hitch, G. (1986). Baddeley, A. (2000). The episodic buffer: a new component of working memory. Trends in Cognitive Sciences, 4, 417-423 Conway, M. A. (2001). Sensory–perceptual episodic memory and its context: Autobiographical memory. Philosophical Transactions of the Royal Society of London. Series B: Biological Sciences, 356(1413), 1375-1384. Daneman, M., & Newson, M. (1992). Assessing the importance of subvocalization during normal silent reading. Reading and Writing, 4(1), 55-77. D Esposito, Mark, Detre, J. A., Alsop, D. C., Shin, R. K., & al, e. (1995). The neural basis of the central executive system of working memory. Nature, 378(6554), 279-81. Hitch, G. J., Woodin, M. E., & Baker, S. (1989). Visual and phonological components of working memory in children. Memory & Cognition, 17(2), 175-185. Jefferies, E., Lambon Ralph, M. A., & Baddeley, A. D. (2004). Automatic and controlled processing in sentence recall: The role of long-term and working memory. Journal of memory and language, 51(4), 623-643. Jonas, E., Schulz-Hardt, S., Frey, D., & Thelen, N. (2001). Confirmation bias in sequential information search after preliminary decisions: an expansion of dissonance theoretical research on selective exposure to information. Journal of Personality and Social Psychology, 80(4), 557. Just, M. A., & Carpenter, P. A. (1980). A theory of reading: From eye fixations to comprehension. Psychological Review, 87(4), 329-354. doi:10.1037/0033-295X.87.4.329 Kalyuga, S., Chandler, P., & Sweller, J. (1999). Managing split-attention and redundancy in multimedia instruction. Applied cognitive psychology, 13(4), 351-371. Luck, S. J., & Vogel, E. K. (1997). The capacity of visual working memory for features and conjunctions. Nature, 390(6657), 279-81. doi: http://dx.doi.org/10.1038/36846 Luu, P., Tucker, D. M., & Derryberry, D. (1998). Anxiety and the Motivational Basis of Working Memory. Cognitive Therapy & Research, 22(6), 577. Rapp, D. (2005). Mental models: Theoretical issues for visualizations in science education. Visualization in science education, 43-60. Schmader, T., & Johns, M. (2003). Converging evidence that stereotype threat reduces working memory capacity. Journal of personality and social psychology, 85(3), 440. Shackman, A. J., Sarinopoulos, I., Maxwell, J. S., Pizzagalli, D. A., Lavric, A., &

9

WORKING MEMORY AND E*TRADE MOBILE PRO Davidson, R. J. (2006). Anxiety selectively disrupts visuospatial working memory. Emotion, 6(1), 40. Spinella, M., Bijou, Y., & Lester, D. (2004). PREFRONTAL SYSTEM DYSFUNCTION AND CREDIT CARD DEBT. International Journal Of Neuroscience, 114(10), 1323-1332. doi:10.1080/00207450490476011 Spinella, M., Yang, B., & Lester, D. (2007). Prefrontal systems in financial processing. Journal of Socio-Economics, 36(3), 480-489.

10

Sign up to vote on this title
UsefulNot useful

Master Your Semester with Scribd & The New York Times

Special offer for students: Only $4.99/month.

Master Your Semester with a Special Offer from Scribd & The New York Times

Cancel anytime.