A professor from Northwestern, Dr. Camelia Kuhnen, who was co-author on the 2005 study showing emotion circuits firing before “deliberative choice” circuits in a simulated stock/bond investing game invited me to this annual meeting of the Society of Neuroeconomics. All of the presentations and something called “poster sessions” review the very latest brain research – stuff that hasn’t been released in journals yet. One kind of has to be into brain anatomy (which I more or less am) but there is much work being done on choice under uncertainty, choice in known vs. unknown probabilities, the role of “theory of mind” (one of the most interesting for reading markets) and how the brain handles risk …(too bad some of those guys who levered up 30/1 weren’t up-to-date on their herd instincts!)
In short, what I am hearing is more detail surrounding what we already know – the human brain DOES NOT operate like a computer wherein it calculates probabilities and optimal “expected value” and then acts. A whole lot more goes on – with heuristic short-cuts, “feelings”, influence by experts and other practical ideas for a trader making the buy or sell decision.
Everyone I have talked to does seem to agree that humans can make better decisions if they are conscious – or work to be conscious? – of all of the influences on their decisions. To that end, the phenomenon of impulsivity is still in the very early stages of being studied …
One of the questions I get from the PhD students and their professors is how could we work with a group of traders to actually study what they do in their real life … any ideas about that anyone?