Published On: 13/02/2022Categories: Neuroeconomics

Every human being, if he wants to, can be a sculptor of his own brain.

It is stated that investment decision making should be based on rational analyzes based on facts and not on emotions .

However, trying to make money on market forecasts can trigger all kinds of emotional responses.

As the question of how investors decide remains controversial, we conducted an activation probability estimation (ALE) meta-analysis using functional magnetic resonance imaging (fMRI) studies through brain scanning in subjects performing tasks related to investment decisions .

Trying to make sense of all the information transmitted by the financial markets by listening to one’s own emotions without being overwhelmed by them implies a coordinated effort of various areas of the brain to reach a decision .

Since the question of how investors make decisions has not yet been fully discovered, it is important to highlight the importance of meta -analysis about the convergence of brain regions necessary for this complex decision-making process .

Investment decisions involve limbic areas that weigh reward against risk , as investment portfolios are based on trying to strike an optimal balance between return and risk.

The emotions towards these two concepts, and the emotional conflicts that can arise when prioritizing between them, are an influential factor that guides this decision process .

When to buy or sell

In the stock market , things like when to buy or sell, market conditions, or even the way other investors behave can affect whether or not an investment will pay off.

As Warren Buffet once warned: 
" Be afraid when others are greedy and greedy when others are afraid ."

Every investor knows how to be fearful and greedy, but what you really need to figure out is when the time is right. to be one or the other.

The same investment behavior and brain activation could lead to different returns from time to time.

Specific area of the brain

Determining the role of a specific area of the brain in this decision-making process is indeed a complicated task.

More information:

I leave at your disposal these interesting articles as a result of collaboration, in the field of Economics , psychology and neuroscience , that is, in the field of NEUROECONOMY :

Connectivity adaptations in dopaminergic systems define the brain maturity of investors

https://www.mdpi.com/2076-3425/11/3/399/htm

An ALE Meta-Analysis on Investment Decision-Making

https://www.mdpi.com/2076-3425/11/3/399

Neural implications of investment banking experience in decision-making under risk and ambiguity

https://psycnet.apa.org/PsycARTICLES/journal/npe/12/1

"Every human being, if he wants to, can be a sculptor of his own brain." 
(Santiago Ramon y Cajal) 

You will find teaching material/educational videos on Neuroeconomics on this website, accessing:

Latest News