This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

« Back to Results

Neuroeconomics

Paper Session

Friday, Jan. 4, 2019 8:00 AM - 10:00 AM

Atlanta Marriott Marquis, M102
Hosted By: American Economic Association
  • Chair: Lino Guimaraes Marujo, Massachusetts Institute of Technology & Federal University of Rio de Janeiro

Students’ Decision Making Process: Results from an Investment Simulation with EEG

Roberto Ivo da Rocha Lima Filho
,
Federal University of Rio de Janeiro
Armando Freitas Rocha
,
University of Sao Paulo
Eduardo Massad
,
University of Sao Paulo

Abstract

The objective of this article is to identify with the aid of an electroencephalogram (EEG) that students use different areas of brain (and therefore different level of neuronal activity) in their decision making process when it comes to a financial investment.
Here, it is used a sample of forty (40) students, both equally divided into 50% male and 50% female. Some findings through brain mapping indicate that these non-financial market practioneers tend to decide under an analytic based rule process rather than an associative based rule one, as the classical financial literature would suggest.
From an economic standpoint, this work is distinct from the classical theories of Finance - Efficient Markets Theory and Modern Portfolio Theory - to the extent that not only employ assumptions of behavioral finance, but also encompass studies of neurocognitive processes.

CAPM and the Brain: A Love Story with Happy End?

Roberto Ivo da Rocha Lima Filho
,
Federal University of Rio de Janeiro

Abstract

The objective of this article is to identify, with the aid of an electroencephalogram (EEG), whether traders use a brain CAPM in their decision-making process when it comes to making a financial investment (and therefore different levels of neuronal activity).A total of forty volunteers were recruited and a monetary incentive was offered at the end of each experiment, that was equally divided into men and women to have a viable and reliable gender comparison. Thus, the purpose of this study was to characterize patterns of brain activity associated with the decision to buy, sell or hold a stock comprised of two experimental portfolios (called A - B and market High - Low), and to correlate these patterns of brain activities.
Taking back the relationship of Sharpe's market model, considering the activities of the brain, besides the characteristics of the market, type of order, result and idiosyncrasies of each of the volunteers, we tried to verify whether there were a portfolio risk indicator versus Ibovespa performance in the simulation screens. In the event of a change in an individual’s perceptions towards to risk, it might create a different investment "beta", that is, a "Brain beta".

On Securities Markets Regulations and Investor’s Trading Behavior: Applying a Psychometric Test across Cultural Settings (First Approach to the Crafting of the Theoretical Model)

Salvador Espinosa
,
San Diego State University
Roberto Ivo da Rocha Lima Filho
,
Federal University of Rio de Janeiro & University of São Paulo

Abstract

This research study analyzes how the cultural background of a portfolio manager has the potential to influence choice, and how securities regulation can help correct the resulting biases in trading decisions. Building upon the concept of delta parameter (Crawford & Ostrom, 2005) and prospect theory (Kahneman & Tversky, 1979) we attempt to capture the potential effect of social constructs and other normative influences on individual choice, and claim that country-specific cultural factors exert a decisive influence in investors’ perceptions about risk and return, which in turn affects trading decisions. The paper argues that this type of analysis is a necessary prerequisite when trying to predict the effectiveness of international securities regulatory reforms.

Market Basket Analysis in Retailing: Using Analytics Models to Create a Telesales Support Tool

Lino Guimaraes Marujo
,
Massachusetts Institute of Technology & Federal University of Rio de Janeiro

Abstract

Data analysis has been increasingly advantageous for retail companies by providing information that serves as input for decision making. Casas Pedro is a retail food company that has as one of its objectives the development of its telesales and the adoption of more sophisticated support technologies. To meet Casas Pedro's demands, a market basket analysis model was developed to examine the products that customers usually buy together and use this information to create promotions, suggestions, or tie-in sales. This project was structured according to the Cross-Industry Standard Process for Data Mining (CRISP-DM) model and uses the Apriori methodology for the analysis of the market basket.
JEL Classifications
  • G4 - Behavioral Finance
  • D9 - Micro-Based Behavioral Economics