Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
neuroeconomics / behavioral finance
Old 09-13-2006, 08:00 AM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,616
neuroeconomics / behavioral finance

This article http://www.newyorker.com/fact/conten.../060918fa_fact
by John Cassidy in the New Yorker was mentioned in the NYTimes.

It mentions several behavioral finance studies and discusses the emerging field of neuroeconomics.

Those reading the pay off mortgage vs invest thread might find it enjoyable. Those still holding stocks with a net loss, may be stimulated to take action.
__________________

__________________
LOL! is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: neuroeconomics / behavioral finance
Old 09-13-2006, 11:33 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,634
Re: neuroeconomics / behavioral finance

Quote:
Originally Posted by LOL!
This article http://www.newyorker.com/fact/conten.../060918fa_fact
by John Cassidy in the New Yorker was mentioned in the NYTimes.

It mentions several behavioral finance studies and discusses the emerging field of neuroeconomics.

Those reading the pay off mortgage vs invest thread might find it enjoyable. Those still holding stocks with a net loss, may be stimulated to take action.
The article talks a lot about the fact that people are risk averse, i.e., they will not take a bet that gives you a fifty fifty chance to win $2 versus lose $1 and less and less likely to take the bet if the stakes go higher. They and other researchers find that behavior strange or even irrational since the odds favor a gain. But the article answers its own question when they point out later that people become much less risk averse if they are presented continuing "bets," like setting up a portfolio or being presented with a series of +2 vs -1 bets.

But the choice may be a very sensible, if unconscious, tendency of humans to protect their interests. Often times a limited lose will be correctly perceived as having a strong negative impact - e.g. you have to give up ER and return to work. A gain of twice that amount has a positive impact but not nearly as dramatic - you can save some money, take some trips... but so what, you were happy as it was - no great gain.

Given the same choice but repeated many times and the liklihood of substantial loss over the long haul becomes deminimus so we take the bet. Seems sensible to me.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
What would you teach in Intro to Personal Finance? Peaceful_Warrior Other topics 18 04-24-2007 12:11 PM
More behavioral finance Martha FIRE and Money 21 10-27-2006 09:40 PM
Behavioral Finance mickeyd FIRE and Money 1 02-05-2006 02:10 PM

 

 
All times are GMT -6. The time now is 01:14 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.