Thursday, September 08, 2005

Brain Regions Blamed for Bad Investment Ideas

How cool is this? Behavioral finance meets neural science.

Brain Regions Blamed for Bad Investment Ideas:
"Researchers say two different brain regions may be involved in making risky vs. conservative investment mistakes, a finding that may eventually help economists build better models of people's investment behavior.'Overall, these findings suggest that risk-seeking choices (such as gambling at a casino) and risk-averse choices (such as buying insurance) may be driven by two distinct [brain regions],' write Camelia Kuhnen of the Stanford University School of Business and colleagues in the Sept. 1 issue of Neuron."
The key finding:
"anticipation of reward stimulates the risk-seeking area of the brain and may increase the likelihood of individuals switching from conservative, risk-aversion investment behavior to risky investment behavior. A similar story in reverse may also apply to marketing strategies used by insurance companies."
For the record I think this is the first time I have ever blogged an article for from WebMD!

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