Preliminary evidence on the somatic marker hypothesis applied to investment choices.

Abstract

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 scenariostasks 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.

Emotional Engagement and Trading Performance

“…The claim that anticipation is key, while reactive emotions are "bad" is not settled with the data from the Bechara-Damasio lesion patient study. A more recent, albeit underpowered, study did produce supportive evidence (Cantarella et al 2018).…”

Les bases incarnées de l’institution monétaire

“…Bien que l’hypothèse des marqueurs somatiques ne soit plus aujourd’hui considérée comme une théorie pleinement satisfaisante, suffisant à expliquer des processus cognitifs tels que la prise de décision, l’étude de la monnaie comme institution cognitive pourrait opportunément tirer quelques enseignements de cette théorie. À simple titre d’exemple, il est possible de signaler qu’une étude a montré la pertinence de prise en compte des marqueurs somatiques dans la compréhension des décisions d’investissement (Cantarella et al, 2018). Concernant plus spécifiquement la monnaie, il serait certainement intéressant d’observer les comportements vis-à-vis de la monnaie que les marqueurs somatiques permettent de prédire.…”