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Testing Theories of Investor Behavior Using Brain Imaging
Ventrmedial Prefrontal Cortex Encodes Net Capital Gain
![Ventrmedial Prefrontal Cortex Encodes Net Capital Gain](/system/content_item_assets/images/1804/large/0654227_2012_Frydman.jpg)
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