Brain sets prices with emotional value

Brain sets prices with emotional value:

Not super surprised by this one:

"...after a series of experiments in which subjects were asked to modify how they felt about something either positively or negatively, the Duke group is arguing that emotional and economic calculations are more closely related than brain scientists had realized. The study appears July 3 in the Journal of Neuroscience."

earlier in article:

"You might be falling in love with that new car, but you probably wouldn't pay as much for it if you could resist the feeling. Researchers at Duke University who study how the brain values things—a field called neuroeconomics—have found that your feelings about something and the value you put on it are calculated similarly in a specific area of the brain."

aiCIO - A Neurology Lesson for Money Managers

Chief Investment Officer-CIO - A Neurology Lesson for Money Managers:

Nice short list (8 points) on how neuroeconomics effects money managers from Paul Zak.

"The crossover applications between neurology and economics don’t end there. In fact, an entire discipline has sprung up in their midst: neuroeconomics. Two leaders in this field have teamed up and crafted a list of the eight crucial takeaways from neuroeconomics for money managers.

According to Paul Zak, the head of a center for neuroeconomics at Claremont Graduate University, and Steven Sapra, a finance professor the University of Southern California, these are the key points of neuroeconomics for money managers:"

The first three points:

1. Anticipating rewards (you can get addicted to the "rush")
2. Balancing risks (you tend to take bigger chances after some success)
3. Wait for it (Delaying gratification can be difficult)

Great article.  Definitely will appear on some tests this semester! :)

Why Do Individuals Exhibit Investment Biases? by Henrik Cronqvist, Stephan Siegel :: SSRN

Why Do Individuals Exhibit Investment Biases? by Henrik Cronqvist, Stephan Siegel :: SSRN

Abstract:
"We find that a long list of investment biases, e.g., the reluctance to realize losses, performance chasing, and the home bias, are "human," in the sense that we are born with them. Genetic factors explain up to 50% of the variation in these biases across individuals. We find no evidence that education is a significant moderator of genetic investment behavior. Genetic effects on investment behavior are correlated with genetic effects on behaviors in other domains (e.g., those with a genetic preference for familiar stocks also exhibit a preference for familiarity in other domains), suggesting that investment biases is only one facet of much broader genetic behaviors. Our evidence provides a biological basis for non-standard preferences that have been used in asset pricing models, and has implications for the design of public policy in the domain of investments."

 
Oh the essays questions I could/will write! 

 
Cite:

Cronqvist, Henrik and Siegel, Stephan, Why Do Individuals Exhibit Investment Biases? (February 19, 2012). Available at SSRN: http://ssrn.com/abstract=2009094

Brainwaves on the economy translated into a fine science - The National

Brainwaves on the economy translated into a fine science - The National:

" The neuroeconomic revolution has passed some key milestones recently, notably the publication last year of the neuroscientist Paul Glimcher's book Foundations of Neuroeconomic Analysis - a pointed variation on the title of Paul Samuelson's 1947 classic, Foundations of Economic Analysis, which helped to launch an earlier revolution in economic theory. And Mr Glimcher himself now holds an appointment at New York University's economics department.

To most economists, however, Mr Glimcher might as well have come from outer space. After all, his doctorate is from the University of Pennsylvania school of medicine's neuroscience department."



I finally got around to watching his presentation at the Nobel Conference from back in October. HIGHLY HIGHLY recommended. It is STAGGERINGLY good!

 

Related articles

• The Dawn of Neuroeconomics (bigthink.com)
• The Neuroeconomics Revolution - Robert J. Shiller (logicamp.wordpress.com)

BBC News - Can brain scans tell us who makes a good chief executive?

BBC News - Can brain scans tell us who makes a good chief executive?:
BBC video that shows how some neuroeconomics tests are done:

"Professor Douglas Saddy of Reading's Centre for Integrative Neuroscience and Neurodynamics looks on as the businessman presses a keypad to make various financial decisions by pressing buttons: "In this case," he explains, "what he is being asked to do is make a judgement about whether given a certain set of information a short-term reward would be better than a long-term reward."
While he presses the keypad his brain activity is being measured. The results of this and a number of other scans will be aggregated to try to draw out some lessons."

Related articles

• Can brain scans tell us who makes a good chief executive? - BBC News (news.google.com)
• Could A Brain Scan Help Determine Your Career Path? (fyiliving.com)
• How Brain Scans Might Call Your Bluff (abcnews.go.com)

Neuroeconomics from MIT

Neuroeconomics | MIT World:

"Drazen Prelec peers into the human brain while it makes decisions. In his corner of the new field of neuroeconomics, Prelec uses a functional magnetic resonance imaging (fMRI) machine to scan minds pondering the pros and cons of purchasing and selling products like Godiva chocolate and flash drives.

Prelec first provides a brief background on the emergence of his discipline, made possible by technological advances in measuring brain activity, and the recent introduction of psychology into economics. The convergence (or perhaps collision) of behavioral approaches and economics has led to a “sustained criticism of the rationality assumption in economics,....”"