from the they-think-therefore-market-crash dept.
Abstract: http://www.pnas.org/content/early/2014/07/02/1318416111
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.
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.
(Score: 2) by frojack on Wednesday July 09 2014, @07:06PM
Seems more likely to me that market bubbles are both induced by, and collapsed by and always sensitive to brain activity of the collective masses of inventors.
No, you are mistaken. I've always had this sig.
(Score: 3, Interesting) by captain normal on Wednesday July 09 2014, @07:19PM
Do I smell the makings of a new high end investment algorithm?
Everyone is entitled to his own opinion, but not to his own facts"- --Daniel Patrick Moynihan--
(Score: 2) by c0lo on Wednesday July 09 2014, @10:06PM
FTFY.
Also, how about declaring sedation as a mandatory precondition to be allowed to trade stocks?
https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford
(Score: 2) by khakipuce on Thursday July 10 2014, @12:06PM
Quite, the collapse is not some independent function of the market, the traders make the market collapse by selling. Presumably at some point every trader is going to get an uneasy feeling that the bubble can't last and start selling thus triggering others to sell. Those others were probably experiencing similar uneasy feelings.
(Score: 5, Interesting) by mendax on Wednesday July 09 2014, @07:30PM
I suspect that many of those who regularly buy and sell stocks, either for themselves or as part of their job, are compulsive gamblers. Addiction changes the brain in very strange ways.
It's really quite a simple choice: Life, Death, or Los Angeles.