ronin
Thinks s/he gets paid by the post
- Joined
- Oct 21, 2003
- Messages
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(a portion of the article clipped from the OnLine WSJ)
"Lessons From
The Brain-Damaged Investor
Unusual Study Explores Links
Between Emotion and Results;
'Neuroeconomics' on Wall Street
By JANE SPENCER
Staff Reporter of THE WALL STREET JOURNAL
People with certain kinds of brain damage may make better investment decisions. That is the conclusion of a new study offering some compelling evidence that mixing emotion with investing can lead to bad outcomes.
By linking brain science to investment behavior, researchers concluded that people with an impaired ability to experience emotions could actually make better financial decisions than other people under certain circumstances. The research is part of a fast-growing interdisciplinary field called "neuroeconomics" that explores the role biology plays in economic decision making, by combining insights from cognitive neuroscience, psychology and economics. The study was published last month in the journal Psychological Science, and was conducted by a team of researchers from Carnegie Mellon University, the Stanford Graduate School of Business and the University of Iowa.
THE PRICE OF FEAR
A new study shows people with brain damage that impaired their ability to experience emotions such as fear outperformed other people in an investment game.
• The brain-damaged participants were more willing to take risks that yielded high payoffs.
• They were less likely to react emotionally to losses.
• They finished the game with 13% more money than other players.
Yet emotions may play a useful role in financial decision making. While the brain-damaged players did well in the specific game in the study, they didn't generally perform well when it came to making financial decisions in the real world. Three of four of the brain-damaged players had experienced personal bankruptcy. Their inability to experience fear led to risk-seeking behavior, and their lack of emotional judgment sometimes led them to get tangled up with people who took advantage of them. Their life experience suggests emotions can play an important role in protecting our interests, even if they sometimes interfere with rational decision making."
"Lessons From
The Brain-Damaged Investor
Unusual Study Explores Links
Between Emotion and Results;
'Neuroeconomics' on Wall Street
By JANE SPENCER
Staff Reporter of THE WALL STREET JOURNAL
People with certain kinds of brain damage may make better investment decisions. That is the conclusion of a new study offering some compelling evidence that mixing emotion with investing can lead to bad outcomes.
By linking brain science to investment behavior, researchers concluded that people with an impaired ability to experience emotions could actually make better financial decisions than other people under certain circumstances. The research is part of a fast-growing interdisciplinary field called "neuroeconomics" that explores the role biology plays in economic decision making, by combining insights from cognitive neuroscience, psychology and economics. The study was published last month in the journal Psychological Science, and was conducted by a team of researchers from Carnegie Mellon University, the Stanford Graduate School of Business and the University of Iowa.
THE PRICE OF FEAR
A new study shows people with brain damage that impaired their ability to experience emotions such as fear outperformed other people in an investment game.
• The brain-damaged participants were more willing to take risks that yielded high payoffs.
• They were less likely to react emotionally to losses.
• They finished the game with 13% more money than other players.
Yet emotions may play a useful role in financial decision making. While the brain-damaged players did well in the specific game in the study, they didn't generally perform well when it came to making financial decisions in the real world. Three of four of the brain-damaged players had experienced personal bankruptcy. Their inability to experience fear led to risk-seeking behavior, and their lack of emotional judgment sometimes led them to get tangled up with people who took advantage of them. Their life experience suggests emotions can play an important role in protecting our interests, even if they sometimes interfere with rational decision making."
