Saturday, November 15, 2014

The Neuroscience Behind the Stock Market's Reaction to Corporate Earnings News

ABSTRACT

Using functional magnetic resonance imaging, we capture neural activity in the ventral striatum—a key area in the human brain's reward processing circuit—of 35 adult investors learning the earnings per share disclosed by 60 publicly traded companies. Before imaging, investors forecasted each company's earnings and took either a long or a short position in its stock. Consistent with prospect theory, we find ...more

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