City Research Online

Preliminary Evidence on the Somatic Marker Hypothesis Applied to Investment Choices

Cantarella, S., Hillenbrand, C., Aldridge-Waddon, L. and Puzzo, I. ORCID: 0000-0002-4480-5519 (2018). Preliminary Evidence on the Somatic Marker Hypothesis Applied to Investment Choices. Journal of Neuroscience, Psychology, and Economics, doi: 10.1037/npe0000097

Abstract

The somatic marker hypothesis 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 somatic marker hypothesis in investment choices using heart rate and skin conductance response measures. Twenty undergraduate students were split equally into expert (defined by familiarity with investments) and novice (no familiarity) groups, because previous research has associated expertise with cognitive differences in decision making scenarios. Both groups completed the Balloon Analogue Risk Task and Behavioral Investment Allocation Strategy task-a computerized simulation of real trading scenarios- as assessments of investment decision-making in conditions of low versus 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, although 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; that is, 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.

Publication Type: Article
Additional Information: © American Psychological Association, 2018. This paper is not the copy of record and may not exactly replicate the authoritative document published in the APA journal. Please do not copy or cite without author's permission. The final article is available, upon publication, at: http://dx.doi.org/10.1037/npe0000097.
Subjects: B Philosophy. Psychology. Religion > BF Psychology
Departments: School of Arts & Social Sciences > Psychology
URI: http://openaccess.city.ac.uk/id/eprint/20930
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