Featured Research

from universities, journals, and other organizations

Neurofinance study confirms that financial decisions are made on an emotional basis

Date:
April 10, 2014
Source:
Aalto University
Summary:
The willingness of decision makers to take risks increases when they play games of chance with money won earlier.  Risk taking also rises when they have the opportunity to compensate for earlier losses by breaking even.

The willingness of decision makers to take risks increases when they play games of chance with money won earlier. Risk taking also rises when they have the opportunity to compensate for earlier losses by breaking even. This outcome was demonstrated by Dr. Kaisa Hyt๖nen, a Finnish Aalto University researcher in neurofinance, together with her international colleagues.

There are frequently various linkages between financial decisions: the circumstances accompanying the decision are rarely completely independent of each other. Both profits and losses, for example, on the securities market, in horse races and in various games, typically increase the amount of risk people are willing to take.

'A brain scan shows that increased risk taking is connected with the emotional reaction caused by winning and losing, and in addition to that, reflection decreases. The stronger the emotion areas of the brain react to experiences of profit and loss, the more people subsequently accept risk,' Dr. Hyt๖nen explains.

The reasons behind financial decision making are determined in neurofinance science by means of operational magnetic resonance imaging. In the test, the brain activity of the subjects was entered as they made consecutive choices subject to risk.

The research data concerning behaviour confirms that the choices people make are influenced by previous experiences and are therefore pathway-bound. The operational magnetic images indicate that the desire to engage in greater risk taking, after profit and loss, is connected with the increasing activity in the processes affecting brain mood, together with the reduction in activity related to processes influencing deliberation and reflection in the brain.


Story Source:

The above story is based on materials provided by Aalto University. Note: Materials may be edited for content and length.


Journal Reference:

  1. Kaisa Hyt๖nen, Guido Baltussen, Martijn J. van den Assem, Vasily Klucharev, Alan G. Sanfey, Ale Smidts. Path dependence in risky choice: Affective and deliberative processes in brain and behavior. Journal of Economic Behavior & Organization, 2014; DOI: 10.1016/j.jebo.2014.01.016

Cite This Page:

Aalto University. "Neurofinance study confirms that financial decisions are made on an emotional basis." ScienceDaily. ScienceDaily, 10 April 2014. <www.sciencedaily.com/releases/2014/04/140410083345.htm>.
Aalto University. (2014, April 10). Neurofinance study confirms that financial decisions are made on an emotional basis. ScienceDaily. Retrieved July 30, 2014 from www.sciencedaily.com/releases/2014/04/140410083345.htm
Aalto University. "Neurofinance study confirms that financial decisions are made on an emotional basis." ScienceDaily. www.sciencedaily.com/releases/2014/04/140410083345.htm (accessed July 30, 2014).

Share This




More Computers & Math News

Wednesday, July 30, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

Twitter Earnings Blow Away Analysts' Predictions

Twitter Earnings Blow Away Analysts' Predictions

Newsy (July 29, 2014) — After reporting a strong second quarter in both revenue and active monthly users, Twitter saw a big boost to its shares in after-hours trading. Video provided by Newsy
Powered by NewsLook.com
It's Not Just Facebook: OKCupid Experiments With Users Too

It's Not Just Facebook: OKCupid Experiments With Users Too

Newsy (July 29, 2014) — If you've been looking for love online, there's a chance somebody has been looking at how you're looking. Video provided by Newsy
Powered by NewsLook.com
Why Facebook Wants You To Download Its Messenger App

Why Facebook Wants You To Download Its Messenger App

Newsy (July 29, 2014) — Facebook will start requiring users to download a separate Messenger application if they wish to continue using Facebook for mobile messaging. Video provided by Newsy
Powered by NewsLook.com
Teen's Phone Ignites Under Her Pillow; How Real Is The Risk?

Teen's Phone Ignites Under Her Pillow; How Real Is The Risk?

Newsy (July 28, 2014) — A Texas teen's Samsung phone apparently ignited while she slept, but what was the real problem here? Video provided by Newsy
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
 
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:  

Breaking News:
from the past week

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:  

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile iPhone Android Web
Follow Facebook Twitter Google+
Subscribe RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins