(Press-News.org) If you're so smart, why aren't you rich? It may be that, when it comes to stock market success, your brain is heeding the wrong neural signals.
In a study in the Proceedings of the National Academy of Sciences this week, scientists at the Virginia Tech Carilion Research Institute and Caltech found that, when they simulated market conditions for groups of investors, economic bubbles — in which the price of something could differ greatly from its actual value — invariably formed.
Even more remarkably, the researchers discovered a correlation between specific brain activity patterns and sensitivity to those bubbles.
"Stock market bubbles form when people collectively overvalue something, creating what economist Alan Greenspan once famously called 'irrational exuberance,'" said Read Montague, director of the Human Neuroimaging Laboratory at the Virginia Tech Carilion Research Institute and one of the study's senior authors. "Our experiments showed how the collective behavior of market participants created price bubbles, suggesting that neural activity might offer biomarkers for the evolution of such bubbles."
Montague and colleagues enrolled 320 subjects in a market-trading simulation game. Up to two dozen participants played in each of 16 market sessions, with two or three participants simultaneously having their brains scanned using functional magnetic resonance imaging, or fMRI, a noninvasive technique that allows scientists to use microscopic blood-flow measurements as a proxy for brain activity.
At some point during the 50 trading periods of each session, a price bubble would invariably form and crash. The scientists had suspected that crowd cognition would result in some bubble formation, though they had not expected it to happen every time.
What surprised the scientists even more were the distinctive brain activity patterns that emerged among the low earners and high earners.
Traders who bought more aggressively based on activity in one brain region, the nucleus accumbens, earned less.
In contrast, the high earners seemed to ignore nucleus accumbens activity in favor of the anterior insular cortex, a brain area active during bodily discomfort and unpleasant emotional states.
Just before a bubble peaked – as their brain scans were revealing an increased activity in the anterior insula – the high earners would begin to sell their shares.
The scientists believe the high earners' brain activity may represent a neural early warning signal of an impending crash.
"It's notoriously hard to identify stock market bubbles and predict crashes by tracking price fluctuations alone," said Colin Camerer, a behavioral economist at Caltech and the study's other senior author. "This experimental method is ideal for understanding the neuropsychology of bubble formation, because we can control the fundamental values and use both prices and brain activity to figure out why bubbles form and crash."
The model may also shed light on other contexts in which groups – and individuals – overvalue something, Montague said.
"This neurobehavioral metric could be used to help quantify situations in which people place excessive value on poor choices, such as drug addiction, compulsive gambling, or overeating," he said.
Montague, who uses computational models to understand neuropsychiatric conditions, noted that the study could not have been conducted without two relatively new additions to the neuroscientist's toolbox: fMRI and hyperscanning.
Hyperscanning, a cloud-based technique that enables multiple subjects in different brain scanners to interact in real time, whether across rooms or across continents, allows scientists to study live human interactions.
Montague likens the technique, which he and his team developed just over a decade ago, to being able to eavesdrop on an entire cocktail party conversation, rather than the monologue fMRI enables.
Why eavesdrop at all?
"We're wired to be social," Montague said. "People are exquisitely sensitive to the social gestures of others, and understanding that sensitivity may provide important clues not just to personal and group interactions, but to mental disorders as well. At the heart of many mental disorders is a deficit in the ability to interact with others."
Montague, who also directs the Virginia Tech Carilion Research Institute's Computational Psychiatry Unit, plans to explore the promise of mindfulness training in moderating one's own brain activity, as well as research into real-world applications, including stock markets.
"The brain can provide us with valuable information about what someone may be perceiving about the market and what they're likely to do next," Montague said. "That gut feeling the high earners had? It was all in their heads."
INFORMATION: END
High earners in a stock market game have brain patterns that can predict market bubbles
Researchers see correlation between brain patterns, sensitivity to market bubbles
2014-07-07
ELSE PRESS RELEASES FROM THIS DATE:
Negar Sani solved the mystery of the printed diode
2014-07-07
VIDEO:
The video shows how a printed label picks up the radio signal from a telephone making a call, and uses the energy to switch the integrated display. This is only...
Click here for more information.
With an article published in the Proceedings of the National Academy of Sciences in the United States of America (PNAS), a thirteen-year-long mystery that has involved a long series of researchers at both Linköping University and Acreo Swedish ICT has finally been solved.
The ...
Neuroeconomists confirm Warren Buffett's wisdom
2014-07-07
Investment magnate Warren Buffett has famously suggested that investors should try to "be fearful when others are greedy and be greedy only when others are fearful."
That turns out to be excellent advice, according to the results of a new study by researchers at Caltech and Virginia Tech that looked at the brain activity and behavior of people trading in experimental markets where price bubbles formed. In such markets, where price far outpaces actual value, it appears that wise traders receive an early warning signal from their brains—a warning that makes them feel uncomfortable ...
Smart and socially adept
2014-07-07
Wanted: Highly skilled individual who is also a team player. In other words, someone who knows his or her stuff and also plays well with others.
Two qualities are particularly essential for success in the workplace: book smarts and social adeptness. The folks who do well tend to demonstrate one or the other. However, according to research conducted by UC Santa Barbara economist Catherine Weinberger, the individuals who reach the highest rungs on the corporate ladder are smart and social. Her findings appear in a recent online issue of the Review of Economics and Statistics.
Weinberger, ...
The tortoise and the hare: A sex difference in marathon pacing
2014-07-07
ALLENDALE, Mich. — Men are more likely than women to slow their pace in the marathon, according to a new study led by a Grand Valley State University researcher. The findings were published in Medicine & Science in Sports & Exercise.
The study, led by Robert Deaner, associate professor of psychology at Grand Valley State, was based on 14 marathons that occurred in the U.S. in 2011, and it included almost 92,000 performances. On average, men ran the second half of the marathon 15.6 percent slower than the first half, whereas women slowed by an average of 11.7 percent. ...
Slim down for the health of it and possibly reduce your hot flashes in the process
2014-07-07
CLEVELAND, Ohio (July 7, 2014)—Now women have yet one more incentive to lose weight as a new study has shown evidence that behavioral weight loss can help manage menopausal hot flashes.
The pilot study, which was published online last month in Menopause, the journal of The North American Menopause Society (NAMS), consisted of 40 overweight or obese white and African-American women with hot flashes, which are the most prevalent symptom of menopause. In fact, more than 70% of women report hot flashes during the menopausal transition, with many of these women reporting frequent ...
US scientists don't publish articles about potential role of innate variation in athletic performance
2014-07-07
ALLENDALE, Mich. — Compared to scientists working in other countries, U.S.-based scientists are underrepresented as authors of articles on the potential role of innate variation in athletic performance that are published in peer-reviewed science journals, according to Grand Valley State University researchers.
The findings are published in the online journal SpringerPlus.
The research, conducted by Michael P. Lombardo, professor of biology, and Shadie Emiah, a Grand Valley State graduate student, used information about the authors of 290 articles published in peer-reviewed ...
Of non-marijuana drug users in the ER, nearly all are problem drug users
2014-07-07
WASHINGTON —Of emergency patients who reported any drug other than marijuana as their primary drug of use, 90.7 percent met the criteria for problematic drug use. Among patients who reported cannabis (marijuana) as their primary drug, almost half (46.6 percent) met the criteria for having a drug problem, according to a study published online Thursday in Annals of Emergency Medicine ("Identifying Patients with Problematic Drug Use in the Emergency Department: Results of a Multi-Site Study.)
"Of patients who reported any drug use in the previous 30 days, nearly two-thirds ...
Sitting too much, not just lack of exercise, is detrimental to cardiovascular health
2014-07-07
Dallas – July 7, 2014 – Cardiologists at UT Southwestern Medical Center found that sedentary behaviors may lower cardiorespiratory fitness levels. New evidence suggests that two hours of sedentary behavior can be just as harmful as 20 minutes of exercise is beneficial.
The study, published in today's online edition of Mayo Clinic Proceedings, examined the association between fitness levels, daily exercise, and sedentary behavior, based on data from 2,223 participants in the National Health and Nutrition Examination Survey (NHANES).
Sedentary behavior involves low levels ...
Rats purposefully use their whiskers in different ways to help navigate in the dark
2014-07-07
VIDEO:
This is an example of the use of the whiskers for collision avoidance. Unexpected whisker contact
results in rapid deceleration of forward locomotion velocity and the animal orients to the...
Click here for more information.
The way rats use their whiskers is more similar to how humans use their hands and fingers than previously thought, new research from the University of Sheffield has found.
Rats deliberately change how they sense their environment using their ...
Small, but plentiful: How the faintest galaxies illuminated the early universe
2014-07-07
Light from tiny galaxies over 13 billion years ago played a larger role than previously thought in creating the conditions in the universe as we know it today, a new study has found. Ultraviolet (UV) light from stars in these faint dwarf galaxies helped strip interstellar hydrogen of electrons in a process called reionization.
The epoch of reionization began about 200 million years after the Big Bang and astrophysicists agree that it took about 800 million more for the entire universe to become reionized. It marked the last major phase transition of gas in the universe, ...
LAST 30 PRESS RELEASES:
Are lifetimes of big appliances really shrinking?
Pink skies
Monkeys are world’s best yodellers - new research
Key differences between visual- and memory-led Alzheimer’s discovered
% weight loss targets in obesity management – is this the wrong objective?
An app can change how you see yourself at work
NYC speed cameras take six months to change driver behavior, effects vary by neighborhood, new study reveals
New research shows that propaganda is on the rise in China
Even the richest Americans face shorter lifespans than their European counterparts, study finds
Novel genes linked to rare childhood diarrhea
New computer model reveals how Bronze Age Scandinavians could have crossed the sea
Novel point-of-care technology delivers accurate HIV results in minutes
Researchers reveal key brain differences to explain why Ritalin helps improve focus in some more than others
Study finds nearly five-fold increase in hospitalizations for common cause of stroke
Study reveals how alcohol abuse damages cognition
Medicinal cannabis is linked to long-term benefits in health-related quality of life
Microplastics detected in cat placentas and fetuses during early pregnancy
Ancient amphibians as big as alligators died in mass mortality event in Triassic Wyoming
Scientists uncover the first clear evidence of air sacs in the fossilized bones of alvarezsaurian dinosaurs: the "hollow bones" which help modern day birds to fly
Alcohol makes male flies sexy
TB patients globally often incur "catastrophic costs" of up to $11,329 USD, despite many countries offering free treatment, with predominant drivers of cost being hospitalization and loss of income
Study links teen girls’ screen time to sleep disruptions and depression
Scientists unveil starfish-inspired wearable tech for heart monitoring
Footprints reveal prehistoric Scottish lagoons were stomping grounds for giant Jurassic dinosaurs
AI effectively predicts dementia risk in American Indian/Alaska Native elders
First guideline on newborn screening for cystic fibrosis calls for changes in practice to improve outcomes
Existing international law can help secure peace and security in outer space, study shows
Pinning down the process of West Nile virus transmission
UTA-backed research tackles health challenges across ages
In pancreatic cancer, a race against time
[Press-News.org] High earners in a stock market game have brain patterns that can predict market bubblesResearchers see correlation between brain patterns, sensitivity to market bubbles