Brain activity foreshadows stock price dynamics

Mirre Stallen, PhD, Assistant Professor Institute of Psychology Leiden University, Senior Researcher Amsterdam University of Applied Sciences

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 (FMRI), we found in a first experiment (n=34, 6 females; 140 trials per subject) that Nucleus Accumbens (NAcc) 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 responses associated with anticipatory affect may extend to forecasting aggregate choice in dynamic and competitive environments such as stock markets.
Record of the seminar: https://us02web.zoom.us/rec/share/DyheHhn2toFwFJyEZMgxmwfICuHDocWAoqXA-Vd95RlXTlkqVpwJ_hr-PbWapy7y.nthltcNnNP6O2ynV
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