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Science

Activity In Brain's Risk Circuits Can Forecast Changes In Stock Prices (scitechdaily.com) 38

Posted by BeauHD from the brain-activity dept.
According to a new study published today in JNeurosci, it may now be possible to forecast changes in stock prices by examining brain activity in regions associated with anxiety and risk-avoidance. "Scientists could accurately forecast market price changes based on the average brain activity among a group but failed when using only prior stock trends or people's investment choices," reports SciTechDaily. From the report: Participants examined real stock price trends from 2015 as they decided if they wanted to buy or sell the displayed stocks. During the task, the researchers used fMRI to measure activity in the nucleus accumbens and anterior insula, areas involved in seeking reward and avoiding risk, respectively. Using the group's average brain activity in these regions, the researchers could forecast how a stock would behave. Increased nucleus accumbens activity forecast when a stock's price would increase the next day, while increased anterior insula activity forecast when it would flip or change direction. Prior stock market trends and the participants' own investing choices could not forecast stock price dynamics.
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Activity In Brain's Risk Circuits Can Forecast Changes In Stock Prices More

Activity In Brain's Risk Circuits Can Forecast Changes In Stock Prices

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  • Obligatory XKCD (Score:5, Funny)

    by bluegutang ( 2814641 ) on Tuesday March 09, 2021 @06:07AM (#61139746)

    Green jelly beans [xkcd.com]

    • How life would be different if for non-STEM fields American Education built up to statistics rather than calculus.
      • See what Calculus based education did to you?

        You are asking how different something would be? you are not asking, "How many standard deviations would the mean be different?". Calculus did not even teach you the fundamentals of adding fluff to mundane things to make it look super important..

  • So now we have to worry about hedge fund guys Matrix-ing us?

  • I'm a skeptic (Score:5, Insightful)

    by Ecuador ( 740021 ) on Tuesday March 09, 2021 @06:52AM (#61139808) Homepage

    This paper doesn't make much sense to me. It looks like the technical analyst's wet dream: They showed subjects a very simple graph, like a thick green stock price line on black, no axes no values anything, for 2 secs then for 4 secs they also had buttons invest yes/no. So they claim our brain has an innate ability to analyze a graph and make a prediction (66% accuracy in one of the 2 experiments I skimmed through), but their own technical analysis algorithms could not.
    I say it doesn't make much sense because, first, it requires that a stock graph predicts its future movement (hence I said it's the technical analyst's wet dream), which is not exactly true - it can predict some trends, but there's a reason most technical analysts work for other people instead of for themselves.
    Second, it shows an untrained (for the task) brain, has some innate ability that their technical analysis software could not match. I mean I know we are better than ML at several tasks we use in our daily lives, but a random task we never do but in which we are so good that it even shows up on an fMRI? I mean you could say the market follows what investors do, so if you could tap into the brains of the investors, you would predict the market fully, right? But in the test, the subjects did not actually follow those brain activity markers that were found out to be "significant", so it's not about decrypting what investors think about their next moves.
    Anyway, that's my take, the result does not make much sense to me, but I can't really be bothered going through the entire paper to see if I missed something, perhaps the next /.er can take over ;)

    • To be clear (Score:4, Insightful)

      by Ecuador ( 740021 ) on Tuesday March 09, 2021 @06:59AM (#61139814) Homepage

      To be clear, I am saying that I suspect they found some low accuracy but reasonably high confidence result by chance. As the experiment itself makes no sense to me to make a hypothesis of and test. If you test a thousand random non-sensical things, how surprised would you be if one of them turned true with 99.9% confidence?

      • If you test a thousand random non-sensical things, how surprised would you be if one of them turned true with 99.9% confidence?

        I think I can answer that, but I’ll need a group of test subjects, some computer monitors, and a bunch of electrodes.

    • I'm a skeptic

      What, you don't think a small bundle of neurons can outperform the conscious mind? Now imagine if you had a large number of small bundles...

    • They may have discovered that when you show someone a graph of a company that keeps going up consistently and ask if they'd invest, the brain responds differently than when you show them wild swings and ask the same question.

      Most investment is in pretty boring companies like Microsoft, Visa, JP Morgan Chase, Procter & Gamble, Coca-Cola, etc. It's not hard to predict that people will keep keep buying Coke and Tide this year, and using their Visa card to do so. P&G has been making money selling Ivory

    • It doesn't make sense to me either, but for a very different reason. Instead of breaking out an expensive fMRI, they could have just asked anyone in the economics or finance departments how stock is valued and gotten the same answer. It's like when that MD unveiled a groundbreaking paper on a novel way to determine the area under a curve, and then found out it was called "calculus".

    • Stock is going up...buy. Stock is going down...sell. Chances are good (but not guaranteed) that the trend will repeat tomorrow.

      The human brain is very good at recognizing patterns. As another example of this pattern recognition, I notice that a large percentage of psychology experiments stumble across a random statistical blip and call it science.

  • It seems to start out wide like a stem of tree then flattens out and about four thin projections from the flat region on the other side, with one short stubby projection near the base of the flat region in different direction.

    Scientists were stunned, they announced, "Behold! Adam Smith was right. This is the invisible hand of the market!"

    The Hand was Good. And everyone rejoiced.

  • How many apes from r/wallstreetbets were duly monitored to reach these conclusions?
  • They had 34 people in one study and 39 people in the second study. They used fMRI, which is notoriously noisy [scientificamerican.com]. I wouldn't take this too seriously.

    • Also, they didn't get the same result in the second study that they got in the first study: "Unlike experiment 1, the Neural model in experiment 2 did not show significant associations of NAcc activity with stock price dynamics..."

  • Social science is booga booga. (Score:4)

    by Oligonicella ( 659917 ) on Tuesday March 09, 2021 @08:42AM (#61139988)
    That *anybody* would believe for one second that monitoring someone's brain activity could **project** stocks is about as bad as crystal-rubbing.

    Nash, it's the same. Anyone believing this "study" is an imbecile.

    • Project risk. That's the important part.

    • What surprises me is that they didn't realize they were just rediscovering economics. Stock prices tend to rise or fall depending on whether or not people think it's a good buy? Wow! It's almost like that's the core concept!

  • Because behavior influences predictions, this is only interesting until a significant part of the market does it. At that time, it becomes problematic dues to feedback.

    • Well, that already happened. The day after the idea of stock was invented. Neuroscientists finally figured out what it is that stock traders do all day.

  • Said Saru while smoothing down his ganglia...

  • Market activity truly is driven by animal spirits.

    • Market activity truly is driven by animal spirits.

      Actually . . . someone once asked the great economist John Mayard Keynes if he thought the stock market would rise or fall.

      He answered something like:

      "It doesn't matter what I think. What matters, is what, I think other people will think."

      That pretty much sums up the stock market and bitcoin speculation.

  • If 500 investors buy a certain stock, I predict the price will go up.

  • Good job figuring out what everyone else has already known since stock was invented - the value of stocks is based on what people think it's going to be in the future. The MaxiMegalon Institute of Slowly and Painfully Working Out the Surprisingly Obvious strikes again.
  • Scientists explain how a pump and squeeze works via statistical analysis of human behavior.
  • Getting ready for the Precogs!

  • A hedge fund purchases several fmri machines

  • Who is this "Brian" and does he have a social media feed that I can follow?!?

    #getrichquicksmart
    #followthemoneymaker
    #brianystocks

  • "What are we going to do tonight, Brain?"

    "The same thing we do every night, Pinky.
    Try to take over the stock market!"

    "ZARF!"

    (But burlap chafes me so...)

  • So, this is saying that there is some little part of the brain that might actually cause one to make the right decision on stock trades?

    IMO, in general, we are not wired properly for trading. Starting with our illogical preference for thinking of moves in asset value arithmetically (points) rather than proportionally (percentage). Major newspapers STILL often use arithmetic charts, which can sensationalize short-term movements. And they almost all report points gain/loss in indices, when they should be rep

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