Neuroeconomics/Neurofinance

This toolset examines how the inner workings of the brain influence our economic and financial decisions.

  1. link Completed

    Neuroeconomics - Wikipedia, the free encyclopedia

    From WIkipedia: "Neuroeconomics is an interdisciplinary field that seeks to explain human decision making, the ability to process multiple alternatives and to choose an optimal course of action. It studies how economic behavior can shape our understanding of the brain, and how neuroscientific discoveries can constrain and guide models of economics.[1] It combines research methods from neuroscience, experimental and behavioral economics, and cognitive and social psychology. " http://en.wikipedia.org/wiki/Neuroeconomics My favorite definition comes from Harvard University's David Laibson's Third neuroeconomics lecture: "Definition: Neuroeconomics is the study of the biological microfoundations of economic cognition" http://isites.harvard.edu/fs/docs/icb.topic951277.files/Neuroeconomics%20Lecture%203.pdf http://isites.harvard.edu/fs/docs/icb.topic951277.files/Neuroeconomics%20Lecture%203.pdf

    Edit Remove Move
  2. Text Completed

    What is neuroeconomics?


    My favorite definition comes from Harvard University's David Laibson's Third neuroeconomics lecture: "Definition: Neuroeconomics is the study of the biological microfoundations of economic cognition"

    From WIkipedia: "Neuroeconomics is an interdisciplinary field that seeks to explain human decision making, the ability to process multiple alternatives and to choose an optimal course of action. It studies how economic behavior can shape our understanding of the brain, and how neuroscientific discoveries can constrain and guide models of economics.[1] It combines research methods from neuroscience, experimental and behavioral economics, and cognitive and social psychology. " http://en.wikipedia.org/wiki/Neuroeconomics


    Edit Remove Move
  3. article Completed

    http://videolectures.net/mitworld_prelec_neuroeconomics/

    Some of the early work in the field (2008) came from Drazen Prelec at MIT. A pioneer in a "dangerously hot research area," 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. This is a bit more at marketing than finance/economics, but very close.

    Edit Remove Move
  4. embed Completed

    Were you born to take risks? Maybe

    An short piece by Chew Soo Hong and Zhong Sogfa of the National University of Singapore introduces the idea that some people may be born to take risks.

    Edit Remove Move
  5. video Completed

    Neurobiological Foundations of Economic Choice - Professor Paul Glimcher

    Really good. Long, but good. Watch it for homework. "Over the past decade substantial progress has been made towards understanding human decision-making. Recent work has identified the mechanisms we use to assign value to the options with which we are faced, be they food, money, water, or social interactions."

    Edit Remove Move
  6. video Completed

    Paul Zak: Trust, morality -- and oxytocin? | Video on TED.com

    There is no doubt that Paul Zak's research on the hormone Oxytocin has been the most popularly accepted work in the field. Here he is describing some of the findings of him and and others. "What drives our desire to behave morally? Neuroeconomist Paul Zak shows why he believes oxytocin (he calls it "the moral molecule") is responsible for trust, empathy and other feelings that help build a stable society."

    Edit Remove Move
  7. Text Completed

    Risk and addiction a quick look

    Not all risk takers are equal

    We all know some people take more risks than others.  Risk taking is good in some circles (Entrepreneurs and explorers are exceptions examples), but can people become addicted to risk taking? Are there predictable differences between subsets of the population when it comes to risk taking?

    There is evidence that the answer to both of the above questions is yes.  (you might want to go back and be sure you understand the two questions, they are pretty important to the understanding of this section).
      
    Let's face the subset question first.  Barber and Odean (1999) showed that certain over confident stock traders too take excessive risks and trade too much.  (We will go over other papers in class).  These excessive risk takers were disproportionately young males.  This finding led to research first to gender based research that found ON AVERAGE  women are more risk averse than men when it comes to their financial investments.  This was later expanded and it was found that the hormone testosterone appears to be the key to this risky behavior. 

    This is summed up very well by Sapienza, Zingales, and Maestripieri in their 2008 paper :
    "...in general, men take more chances in their financial lives than women do.....They found that higher levels of testosterone in women equaled greater risk-taking behaviors. If a woman's level of testosterone was similar to a man's, the gap in risk taking disappeared."
    However, this testosterone hypothesis is not the only explanation.  The full story is also tied to the question of whether people can become addicted to risk.  The answer to this (yes) is also grounded in our hormones:   Successful risk taking releases dopamine into the blood.  Dopamine a "pleasure hormone" is what leads to addiction (see Time) .  But it is not quite that easy for just like recreational drugs some become addicted while others do not. 

    The difference?  Some people have a predisposition to addiction.  This stems from the neurotransmitter receptors in the brain.  In some people, the receptors are "too good" at taking in the dopamine.  This leads to desensitization of the dosage, which leads to larger and larger "hits" needed to get the same feeling.  Statman and others speculate that this same time of story happens to financial investors who want new novel (and often risky) investments to satisfy his addiction.   (I will update with sources later--very tired at the moment) 

    Edit Remove Move
  8. article Completed

    It's dope! Actually it's Dopamine

    "Risk-taking, by definition, defies logic. Reason can't explain why people do unpredictable things - like betting on blackjack or jumping out of planes - for little or, sometimes, no reward at all. There's the thrill, of course, but those brief moments of ecstasy aren't enough to keep most risk takers coming back for more - which they do, again and again, like addicts."

    Edit Remove Move
  9. article Completed

    The Trust Molecule

    Why are some people trustworthy while others cheat and lie, some generous and others coldhearted louts? Part of the answer may lie in the hormone oxytocin. In an excerpt from The Moral Molecule, Paul J. Zak writes about the new science of morality-and how it could be used to create a more virtuous society.

    Edit Remove Move
  10. link Completed

    Desperately Seeking Sensation: Fear, Reward, and the Human Need for Novelty - Dana Foundation

    great paper

    Edit Remove Move

Continue learning by following more paths or create your own. Join for FREE

By clicking 'Get Started Free' you agree to our Terms of Service and Privacy Policy