Highlight Photo
Testing Theories of Investor Behavior Using Brain Imaging
Ventrmedial Prefrontal Cortex Encodes Net Capital Gain
Investors sell winning stocks too early because they receive pleasure (positive hedonic impact) from the act of selling a winning stock. This behavior is suboptimal, but is explained by the nature of reward processing in the brain, which evolved under conditions very unlike modern financial markets.
Credits: Cary Frydman
