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Preliminary evidence on the Somatic Marker Hypothesis applied to investment choices

Cantarella, S., Hillenbrand, C., Aldridge-Waddon, L. and Puzzo, I. (2018) Preliminary evidence on the Somatic Marker Hypothesis applied to investment choices. Journal of Neuroscience, Psychology, and Economics, 11 (4). pp. 228-238. ISSN 1937-321X

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To link to this item DOI: 10.1037/npe0000097

Abstract/Summary

The somatic marker hypothesis (SMH) is one of the more dominant physiological models of human decision making and yet is seldom applied to decision making in financial investment scenarios. This study provides preliminary evidence about the application of the SMH in investment choices using heart rate (HR) and skin conductance response (SCRs) measures. Twenty undergraduate students were split equally into expert (defined by familiarity with investments) and novice (no familiarity) groups - previous research has associated expertise with cognitive differences in decision making scenarios. Both completed the BART and BIAS - a computerized simulation of real trading scenarios - tasks as assessments of investment decision making in conditions of low vs high uncertainty, as defined by the Bayesian Calculation (level of certainty is more than:(1 – (–300%)) / ((300% – (–300%)) = 66.67% (0.67). Results suggest that, whilst primary inducers (innate physiological responses) support and guide optimal decision making in conditions of uncertainty, secondary inducers (physiological responses dependent on memory/experience) moderate this effect i.e. the stressful thoughts that accompany the task restrict optimal decision making. This study contributes to the current knowledge on why emotions in finance can lead people to suboptimal decisions.

Item Type:Article
Refereed:Yes
Divisions:Henley Business School > Marketing and Reputation
ID Code:80454
Publisher:American Psychological Association

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