Oct

11

 It's somewhat relieving to know that one is not an automaton, a psychopath, or possessing low expectations because one is mostly indifferent when trading.

Abstract of study:

Trading experience modulates anterior insula to reduce the endowment effect. Trading experience has been shown to reduce the endowment effect, a decision-making bias that distorts market prices and reduces trade. Understanding the mechanisms underlying how experience changes this bias will provide important insights for developing interventions to improve market efficiency. Using functional magnetic resonance imaging, we show that market experience causes a reduction in right anterior insula activation during selling, which mediates a decrease in the endowment effect. These findings suggest that trading mitigates negative affective responses in the context of selling. People often demand a greater price when selling goods that they own than they would pay to purchase the same goods—a well-known economic bias called the endowment effect. The endowment effect has been found to be muted among experienced traders, but little is known about how trading experience reduces the endowment effect. We show that when selling, experienced traders exhibit lower right anterior insula activity, but no differences in nucleus accumbens or orbitofrontal activation, compared with inexperienced traders. Furthermore, insula activation mediates the effect of experience on the endowment effect. Similar results are obtained for inexperienced traders who are incentivized to gain trading experience. This finding indicates that frequent trading likely mitigates the endowment effect indirectly by modifying negative affective responses in the context of selling. 

There are basic summaries around the uchicago site.


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  1. Anonymous on October 12, 2016 10:49 am

    So global minima cant be eliminated! Either you play and accept the risk or you give up and never try…

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