TY - JOUR
T1 - Brain Activity Foreshadows Stock Price Dynamics
AU - Stallen, Mirre
AU - Borg, Nicholas
AU - Knutson, Brian
PY - 2021/4/7
Y1 - 2021/4/7
N2 - Successful investing is challenging since stock prices are difficult to consistently forecast. Recent neuroimaging evidence suggests, however, that activity in brain regions associated with anticipatory affect may not only predict individual choice, but also forecast aggregate behavior out-of-sample. Thus, in two experiments, we specifically tested whether anticipatory affective brain activity in healthy humans could forecast aggregate changes in stock prices. Using functional magnetic resonance imaging, we found in a first experiment (n = 34, 6 females; 140 trials/subject) that nucleus accumbens activity forecast stock price direction, whereas anterior insula (AIns) activity forecast stock price inflections. In a second preregistered replication experiment (n = 39, 7 females) that included different subjects and stocks, AIns activity still forecast stock price inflections. Importantly, AIns activity forecast stock price movement even when choice behavior and conventional stock indicators did not (e.g., previous stock price movements), and classifier analysis indicated that forecasts based on brain activity should generalize to other markets. By demonstrating that AIns activity might serve as a leading indicator of stock price inflections, these findings imply that neural activity associated with anticipatory affect may extend to forecasting aggregate choice in dynamic and competitive environments such as stock markets.
AB - Successful investing is challenging since stock prices are difficult to consistently forecast. Recent neuroimaging evidence suggests, however, that activity in brain regions associated with anticipatory affect may not only predict individual choice, but also forecast aggregate behavior out-of-sample. Thus, in two experiments, we specifically tested whether anticipatory affective brain activity in healthy humans could forecast aggregate changes in stock prices. Using functional magnetic resonance imaging, we found in a first experiment (n = 34, 6 females; 140 trials/subject) that nucleus accumbens activity forecast stock price direction, whereas anterior insula (AIns) activity forecast stock price inflections. In a second preregistered replication experiment (n = 39, 7 females) that included different subjects and stocks, AIns activity still forecast stock price inflections. Importantly, AIns activity forecast stock price movement even when choice behavior and conventional stock indicators did not (e.g., previous stock price movements), and classifier analysis indicated that forecasts based on brain activity should generalize to other markets. By demonstrating that AIns activity might serve as a leading indicator of stock price inflections, these findings imply that neural activity associated with anticipatory affect may extend to forecasting aggregate choice in dynamic and competitive environments such as stock markets.
KW - accumbens
KW - choice
KW - decision
KW - financial
KW - forecast
KW - insula
U2 - 10.1523/JNEUROSCI.1727-20.2021
DO - 10.1523/JNEUROSCI.1727-20.2021
M3 - Article
VL - 41
SP - 3266
EP - 3274
JO - The Journal of Neuroscience
JF - The Journal of Neuroscience
SN - 1529-2401
IS - 14
ER -