Neurofinance

Both research and clinical evidence confirm that subtle shifts in neurochemistry affect financial decision making. Alterations in brain functioning are driven by events as mundane as the weather and as intense as viewing images of a Greek riot. Despite the individual nature of financial decision making, an understanding of neurobiology can also be applied at the group level. Exogenous shocks and the endogenous environment affect both individuals and the crowds of financial decision makers of which they are a small part. The decisions of such crowds shift global asset prices. This chapter explores research into the biology of financial decision making and demonstrates how many of the most successful financiers have built decision processes that strengthen vulnerabilities identified by neurofinance researchers.