Risk Psychology & Neuroeconomics Society 2009

Back and rested from a weekend trip to academia -

The annual Society for Neuroeconomics meeting, held in Evanston this year, reviews a cornucopia of pre-publication research papers centered on the topic of decision making under risk and ambiguity. With everything from electrodes being implanted into patients who were having brain surgery for intractable epilepsy to the actual formulas of computational neuroscience (which a hedge fund or two lists as their primary strategy) to the one-trial learning of a Monterrey Bay slug, there is an almost incomprehensible amount of information presented over the course of three days.

A couple of extrapolated highlights especially for speculators though -

#1) Inter-temporal discounting refers generally to the phenomenon of taking the money and running – i.e. “why can’t I just wait until my target“? There were numerous studies presented both in session and on poster boards… too many for this short de-brief. Stay tuned -

2) Too many choices reduces the likelihood of a choice at all.  Colin Camerer (pronounced cam-er-er) presented this last and given his stature as a game theorist and neuroeconomist… it was worth the change flight fee!  Too many things on your charts anyone?

3) Courtesy of Nichole Lighthall of USC – under stress, men will react by “more trials” (i.e. over-trading?) whereas women will react by being more careful. Sound familiar?

4) Cal-tech is again coming to aid of the Theory of Mind idea in perceiving and executing in complex games. (In other words, the Social Markets Hypothesis). This IS going to be big – and the original paper does appear on its way belated way to The Journal of Finance per Dr. Peter Bossaerts.

5) And just to make your day – The University of Iowa discussed in some detail why if you engage in “self-control” (i.e. sticking to a trading plan), it is experimentally proven that you will subsequently have less ability to engage in “self-control”. … This could be a disheartening fact for many short term discretionary or even model based traders… but look at it this way, at least it isn’t just you!

So… just a few highlights… and points to look forward to as Trader Psyches and our new parent The Re-Think Group discusses The Psychology of Risk over the next few months!

Oops – one more – our “French PhD Chick” Elise is defending her dissertation on October 9th in Switzerland. Wish her luck and we (sort of) look forward to changing her name to Dr. Payzan Le Nestour. We also hope to bring her to the US as an advisory researcher!

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