Introduction of Emotional Reasoning

Have you ever made a judgment based on your emotion? Have you ever found yourself thinking “I know this test will fail because I feel scared.” If this sounds familiar to you, you must have experienced emotional reasoning. Most of us have fallen prey to this at some point in time. These thought patterns are usually automatic and can be difficult to identify. Emotional reasonings are irrational and often causes errors in thinking. What exactly is emotional reasoning?

Definition of Emotional Reasoning

A cognitive distortion is a thought pattern that negatively distorts our perception of reality. One such distortion is emotional reasoning. Emotional reasoning is defined as a thought pattern that allows emotions to take over rational judgment, concluding that our emotional reaction proves something is true even when empirical evidence tells us otherwise. Generally, we took emotions as information in making decisions/conclusions even when the emotions are not triggered by the situation being evaluated.

How Emotional Reasoning can lead to Bad Investment Decisions

What does it have to do with investment decisions? Stock investment decisions are always tinged with emotion. It's no secret that emotions can lead to bad investment decisions. After all, the stock market is often driven by fear and greed. When these emotions take over, it can lead to irrational decisions that can cost you dearly. One of the biggest dangers of emotional reasoning is that it can lead you to believe that you know something when you don't. For example, you might see a stock that has been rising steadily and think that it's a sure thing. Or you might see a stock that has taken a sharp decline and think that it's doomed. In both cases, your emotions are leading you to make a decision based on a false premise.

Other examples:

1. Being “Bad” at money

You think you’re bad at investing during a bear market. You are feeling unqualified in managing your portfolio despite evidence to the contrary where you’ve earned 400% for the past 7 years. You convinced yourself that you are bad at this and quit the stock markets, ignoring the fact that everybody loses money in bear markets. Your emotional reasoning leaves you earning less than what you deserve.

2. Fear of investing

You’re afraid of investing so you assume that investing is dangerous, ignoring the facts that there are non-risky/low-risky ways of investing. Emotional reasoning leads in this way to procrastination or even not doing investment at all. Therefore, you do not open yourself to the possibility of making more money.

Examples of Emotional Reasoning

• Your team has lost a match and you feel sad so this proves your team must have been treated unfairly.
• You feel bad, so you’re convinced that you must have done something wrong.
• You get angry at him/her, so you concluded that they must have done something bad to you though none of their behaviours seems to provoke anyone else
• You can’t help feeling worthless and dumb even after your teacher and those around you told you that your grades were excellent and you’ve achieved much more than those around you
• A student who is unable to finish the final question in his exam due to time constraints, although missed answering one question will not cause him to fail the exam, but the student still kept worrying about it and blamed himself even though he managed to finish all other questions.
• An athlete who fell during a 100 meters sprint kept recalling the awkward moment of himself and being unable to face his friends due to shamefacedness, but in fact, his friends didn't think it was awkward and even showed him support and respect for continuing the race.

Ways to Overcome Emotional Reasoning

If your belief is often grounded in emotions rather than logical facts, it is imperative to look for objectivity to manage this cognitive distortion. Overcoming it can be difficult but it is possible.

1. Being aware of your emotions

One of the ways to make aware of the distortions is to record. Specifically, jot down difficult situations that you face and how emotions or feelings lead you to the conclusion. In this way, it could allow you to reflect on your thought process and patterns, allowing you to identify when emotional reasoning takes over.

2. Question your emotion

Why are you feeling this way? What is causing these emotions? Does it have something to do with the situation I’m evaluating?

3. Search for evidence

What facts do you have to support your conclusion? What are some of the pieces of evidence that support and contradict your emotions and feelings? List out what you know to be true and what you feel to be true. Listing out allows us to visualize which are the facts and which are assumptions?

4. Discuss your emotions

Check with friends or colleagues to get their feedback. Talk to them about your concern and gain much-needed objective perspective.

The Bottom Line

In conclusion, emotional reasoning is a type of thinking that can lead to inaccurate conclusions. This is because we tend to rely on our feelings and emotions to make decisions, without taking the time to logic and reason through the situation. As a result, we may come to conclusions that are inaccurate or even harmful. While emotional reasoning can be helpful in some situations, it is important to be aware of its potential pitfalls. We should always strive to think objectively and logically, in order to make the best decisions possible.

There are a few tricks you can use to help check your pattern of thinking and guide you away from emotional reasoning.

• Separate fact from fiction and ask yourself, “Is what I’m focusing on fact, or is it a reality I’ve created in my mind?”
• Understand that your feelings are not representative of your worth. Just because you are feeling a certain way doesn’t mean you have evidence for an argument against you.
• Remember that feelings are just feelings. While your feelings are always valid, they shouldn’t dictate how you view reality.

Author

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This article is written by Dyce Lim, Research Analyst

Dyce is a research analyst in TED Optimus, tasked with researching and performing analysis on companies. She holds a Bachelor of Science in Financial Analysis Degree from Sunway University. During her time at Sunway University, She has participated in the CFA Research Challenge 2019/2020 and won second runner-up in the event. She is also a CFA Level 2 candidate. She is an in-house author of TED Optimus.