Finnish Study Shows Emotions Affect Financial Risk
The study led by Aalto University neurofinance researcher Dr. Kaisa Hytönen found that both winning and losing — whether on the stock market, in a horse race, or a game of chance — typically increase the amount of risk people are willing to take.
“A brain scan shows that increased risk-taking is connected with the emotional reaction caused by winning and losing, and in addition to that, reflection decreases,” she said.
“The stronger the emotion areas of the brain react to experiences of profit and loss, the more people subsequently accept risk.”
For the study, the brain activity of subjects as they made choices subject to risk were analyzed using magnetic resonance imaging.
According to the researcher, the data confirmed that the choices people make are influenced by previous experiences.
The MRI images indicate that the desire to engage in greater risk taking, after profit and loss, is connected with increased activity in the processes affecting mood, according to the study.
Additionally, the study found there is a reduction in activity related to processes influencing deliberation and reflection in the brain.
The study was published in the Journal of Economic Behavior & Organization.
Source: Aalto University
Wood, J. (2014). Finnish Study Shows Emotions Affect Financial Risk. Psych Central. Retrieved on May 28, 2015, from http://psychcentral.com/news/2014/04/13/finnish-study-shows-emotions-affect-financial-risk/68422.html