Novelty, Stress, and Biological Roots in Human Market Behavior

Abstract

Although studies examining the biological roots of human behavior have been conducted since the seminal work Kahneman and Tversky, crises and panics have not disappeared. The frequent occurrence of various types of crises has led some economists to the conviction that financial markets occasionally praise irrational judgments and that market crashes cannot be avoided a priori (Sornette 2009; Smith 2004). From a biological point of view, human behaviors are essentially the same during crises accompanied by stock market crashes and during bubble growth when share prices exceed historic highs. During those periods, most market participants see something new for themselves, and this inevitably induces a stress response in them with accompanying changes in their endocrine profiles and motivations. The result is quantitative and qualitative changes in behavior (Zhukov 2007). An underestimation of the role of novelty as a stressor is the primary shortcoming of current approaches for market research. When developing a mathematical market model, it is necessary to account for the biologically determined diphasisms of human behavior in everyday low-stress conditions and in response to stressors. This is the only type of approach that will enable forecasts of market dynamics and investor behaviors under normal conditions as well as during bubbles and panics.

Chain Reaction of Behavioral Bias and Risky Investment Decision in Indonesian Nascent Investors

“…However, financial behavior emerged because investors were sometimes ir-rational (Kumar and Goyal 2015). Kahneman and Tversky (Kahneman and Tversky 1979;Sarapultsev and Sarapultsev 2014), with their prospect theory, explained that the outcomes were not the only considerations of investors, but a variety of potential gains and losses also penetrated their minds. The interaction of return and risk could make investors ir-rational.…”

Как Методологическая Экспансия Нейробиологии В Сферу Экономики Влияет На Способы Объяснения Поведения Экономического Агента?

“…Во-первых, в нейроэкономике не учитывается онтологическая специфика объектов из разных наук (мозга из нейробиологии и экономического поведения и экономического взаимодействия из экономики) [6, p. 13]. Во-вторых, пока не установлена однозначная корреляция между отделами мозга и поведенческими реакциями, экстраполяция данных из нейробиологических и психологических экспериментов в социально-экономическую сферу требует дополнительной проверки [8]. В-третьих, в нейроэкономике практически не уделяется внимание исследованию психической составляющей экономического субъекта, тем самым нивелируется влияние психологических состояний на способы взаимодействия экономических субъектов [2].…”

SMEs’ Performance in Indonesia: The Nexus of Notable Ethics-Strategic Behavior Constructions

“… 10 Furthermore, the seminal work of Kahneman and Tversky has noted how this rationality may create risky behavior upon making a judgment. 11 , 12 As rational behaviors are subject to potential biases, 13 SME entrepreneurs may be entitled to a prerequisite strategic condition that may affect the ideal behavior upon dealing with money.…”