ECON S-1915 Neuroinvesting: Neuroscience and Financial Decision Making
The study of decision making has a long tradition, particularly in economics, where the choices of economic agents have been analyzed with the aid of a number of methodologies and theoretical models. Many academic researches and empirical evidence show how institutional and retail investors are inclined to make mistakes when making financial decisions; moreover, people do not have stable preferences, but make choices that are influenced by the context—and the feelings—in which individuals are asked to make a decision. Neuroscience methodologies applied to investments (so-called neuroinvesting) help to explain these anomalies, highlighting how investors' brains and bodies react to different stimuli and situations. In-depth knowledge of neuroinvesting foundations is then crucial for making informed decisions and therefore better choices, which are consistent with investors' needs and expectations. This course aims to help participants to understand practical impacts and benefits that neuroscience applied to investments has on investors' decision-making processes. Starting from an overview about what neuroscience is and how brain activity can be measured, the course describes the underlying mechanisms related to motivations and to judgments under risk and uncertainty. The course focuses on the role of emotions and on investors' risk perception and risk tolerance. The course ends by introducing pathological choices, ethics, and trust.