Originally published September 23 2005
Scientists say emotion may play a big part in financial decision making
by Mike Adams, the Health Ranger, NaturalNews Editor
Scientists at the Center of Excellence for Aging and Brain Repair at the University of South Florida College of Medicine in Tampa have found that emotions play a major role in financial decision making, Forbes reports, although economists still don't know precisely what role those emotions play.
New research appearing in the Sept. 1 issue of Neuron identifies two brain regions that are activated before people make certain types of investment mistakes.
They're more associated with emotions or how people feel before they're about to do something," said senior author Brian Knutson, an assistant professor of psychology and neuroscience at Stanford University.
"Anticipatory emotions may have some role in decision-making and even financial decision-making."
Knutson conducted the study in conjunction with Stanford doctoral candidate Camelia Kuhnen, whose specialty is finance.
"This research suggests that we're understanding different parts of the brain in relation to decision-making and emotions," added Paul Sanberg, director of the Center of Excellence for Aging and Brain Repair at the University of South Florida College of Medicine in Tampa.
Anticipatory emotions are only rarely included in economists' calculations of how people make decisions, Knutson said.
And though the murky area of human feelings is starting to factor into some economic models, economists still lack a way of understanding how emotions might influence choice.
Study participants, all of whom were Stanford Ph.D.s, were asked to pick between two stocks and a bond several times over.
Just like the stock market, the stakes were real dollars.
Before the transactions began, the researchers randomly designated one stock a "good" one (more likely to make money) and one a "bad" stock (more likely to lose money).
Before participants made "risk-seeking" mistakes (such as investing in a stock with a "bad" history), an area of the brain called the nucleus accumbens (NAcc) was activated.
On the other hand, before participants made "risk-averse" mistakes (such as investing in a safe bond when a "good" stock would have been better), an area of the brain called the anterior insula was activated.
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