"Neuroscientists like Dr. Brian Knutson, a professor at Stanford University, have found that your dopamine levels become elevated when you anticipate a large, uncertain financial gain. Scientific studies have also shown that the more surprised you are by a financial gain the bigger your dopamine rush.
Like a primitive hunter looking for food or a drug addict looking for a fix, this emotional high reinforces your risk-taking behavior, which can cause you to make irrational financial decisions. This explains why some people love to gamble, even if the odds of winning are next to none. It also helps explain why investors experience behavioral biases, like positive feedback loops and are willing to take more investment risk towards the end of a bull market."
Saturday, April 17, 2010
Take the "Dope" Out of Your Finances