Enter the Neuro-Economists: Why Do Investors Do What They Do? - New York Times

Behaviorial Finance at its best!

Enter the Neuro-Economists: Why Do Investors Do What They Do? - New York Times:

"...economists are studying these phenomena scientifically. The economists are using a new technology that allows them to trace the activity of neurons inside the brain and thereby study how emotions influence our choices, including economic choices like gambles and investments.

For instance, when humans are in a 'positive arousal state,' they think about prospective benefits and enjoy the feeling of risk. All of us are familiar with the giddy excitement that accompanies a triumph. Camelia Kuhnen and Brian Knutson, two researchers at Stanford University, have found that people are more likely to take a foolish risk when their brains show this kind of activation.

But when people think about costs, they use different brain modules and become more anxious. They play it too safe"

A true must read!