The Parkinson’s-Dopamine-Risk Ramification

Parkinson’s disease is a progressive disease of the human nervous system (mainly the motor system, this week’s lecture’s topic), which is caused by a degeneration of certain areas of the substantia nigra of the basal ganglia in the midbrain. Because said area of the brain is largely responsible for voluntary initiation of movement, Parkinson’s has the cruel effect of hypokinesia (decreased movements of the body): typical symptoms are slowness of movement, tremors of the hand & jaw (mostly present when the person is at rest), and a general difficulty in initiating movements. As in many processes in the nervous system, the neurotransmitter dopamine plays a central role also in Parkinson’s. Because of the multitude of its mechanisms and Parkinson’s causing a depletion of dopamine, increasing the body’s dopamine levels through administration of L-dopa (a dopamine precursor) alleviates some of the symptoms of Parkinson’s.

Dopamine, however, is also involved in decision-making when facing a risky choice. A sudden increase, or generally increased levels, of dopamine in your brain seems to cause people to make riskier decisions, compared to people with lower dopamine levels/spikes. This seems to be linked with the “reward-effect” in the brain caused by dopamine, which can also lead to addictive behavior.

Linking this finding with the standard treatment for Parkinson’s disease (i.e. increasing dopamine levels), a quite severe consequence becomes apparent: patients receiving treatment for Parkinson’s disease through L-dopa administration can display more pronounced risk-seeking behavior (compared to individuals not taking L-dopa). This effect was shown e.g. in this study.

Besides the terrible physical symptoms caused by Parkinson’s disease, potentially excessive risk-taking in financial markets (especially when not being sufficiently knowledgeable) can also have severe negative financial consequences for an individual. But also for individuals not suffering from Parkinson’s disease, the levels/spikes of dopamine when facing a risky choice can affect decision-making in a negative (more risky) way, as we’ve pointed out already previously in this blog.

Therefore, once again neuroscientific advances can contribute to the understanding of market participants and their actions, which Finance desperately seeks to understand (and model).

Turbulent times

This week’s topic revolved around mental illness and different disorders. The book discussed anxiety and affective disorders, as well as schizophrenia.

Anxiety disorders, for instance, are characterized by individuals expressing and reacting to fear in the face of stimuli that people perceive “inappropriately” as threatening. These include panic disorders, agoraphobia (anxiety about situations where escaping or leaving would be difficult), social phobia or other specific phobias.

The number of anxiety disorders diagnosed has been increasing in many parts of at least the Western world, and the finance industry at large has not been void of this development. Jobs in some realms of finance, such as investment banking, are characterized by long working hours, fast-paced deadlines and often competitive social dynamics, all of which can induce pressure and stress. Even though the hallmark of anxiety disorders is the brain’s inappropriate stress response to a stressor, a high-stress environment, can be argued, could be likely to cause individuals to feel stress even when there is no apparent threat. There have been multiple cases (e.g. here and here) reported of employees in the banking sector suffering from anxiety or even depression and from time to time, harrowing incidents of suicides.

Furthermore, some research has been conducted on how exposure to the stock market – an individual’s involvement in buying stocks and consequently following the development of the stock price – induces anxiety. A particular piece of research studied the impact of exposure to the stock market on the mental health of Chinese participants, when the market was particularly turbulent. The research showed clear results of such exposure inducing anxiety, even when the stock prices were increasing.

It was great to read about the treatments for the different disorders and how these have advanced throughout the years. We wish the best of luck for the scientists working in these fields also for future discoveries!

ASD and decision-making

This week our book chapter discussed “the wiring of the brain”, explaining how neurons form by proliferating, migrating and differentiating to their different functions in the nervous system and connect by allowing their axons to grow and attach to other neurons.


At first glance and ponderation, we found it a bit difficult to link this week’s reading to issues in behavioural finance or economics. But fear not, we managed to pull through with it in the end! J


The book talks about the autism spectrum disorder (ASD) and how, even though the disorder is heritable, the exact genetics of its development are still studied. ASD seems to be due to gene mutations which occur already in the parents’ sperm or egg cells and are passed on to the children. DNA sequencing technology has enabled scientists to locate the ASD symptom -inducing genes and quantify them to a total of hundreds. This suggests according to the chapter that there are many different cellular processes during brain development that can be the reason for ASD, as they are disrupted.


In the much-mentioned behavioural and sustainable finance -course, we had to study a cognitive bias, and test whether our classmates were susceptible to this bias. Our group chose to focus on the framing effect, a bias which asserts that the way a question or situation is framed, e.g. by the words used or pictures shown, can influence decision-making. Our test results showed that there was at least some inclination towards such bias also amongst our class.


Online, I came across a research paper (Shah et al., 2016) that combined these two topics: the way people with ASD are affected by the framing effect! It seems very interestingly that people with ASD are less prone to adhere to the framing effect and be fooled by this cognitive bias when making decisions. The researched reasons for this entail a reduced tendency of individuals with ASD to incorporate emotional information into the decision-making process.

Molding Your Nerves Like Clay

“The brain you have is the brain you were born with.”

What sounds like a one-sentence horror story (at least for neuroscientists and behavioral scientists) is thankfully not true. Otherwise, we could probably expect everyone to walk & talk like a toddler – until they are 80 years old.

While it is true that most of the brain development and neural wiring happens before we are even born, it is the stimuli we are exposed to after our birth that shape those connections.

Roughly speaking, one can think of brain development like this: during pre-natal development (i.e. before birth), our nervous system makes an abundance of neural connections with the consequence of many connections being functionally redundant (only to some degree of course, though, otherwise our ears would be wired with the visual cortex). After our birth, a myriad of sensory stimuli assails our nervous system. This, in turn, causes it to evaluate which connections are necessary – and which should even be strengthened.

This phenomenon of our nervous system eliminating, reinforcing, and reorganizing its connections is called neuroplasticity. Neuroplasticity is most present (and inducible) during childhood and slowly diminishes subsequently, simply because our nervous system is still quite “unrefined” during our early years and has more potential for change.

It is very important to highlight, though, that neuroplasticity never quite disappears and enables us to learn new things and adapt to novel stimuli throughout our lifetime!

So, what does that have to do with behavioral finance, you think? Quite a lot!

It essentially means that you are not stuck with the biases, heuristics, and thinking traps influencing your financial decision making until the rest of your life, without any chance to avoid all those “money traps” out there. Next time you think that you will never understand this Finance-stuff being babbled about on this blog – think again. Rather, actively seek and expose yourself to new learning opportunities and you will start to master things you have never thought were even possible.

Hearing, Without Even Hearing It

Of all the structures & organs that have evolved and the human body has developed, the auditory & vestibular system is (arguably) one of the most complex and fascinating ones. Originating from the lateral line system still present today in aquatic vertebrae, fish, and amphibians (where it serves as a tactile sense), it enables us humans today to hear over an astonishing range of frequencies (pitch) & intensities (loudness), as well as always keep our balance.

The human ear can detect frequencies from as low as 20 Hz up to 20,000 Hz (a diminishing rate as we age, though). Even more amazingly, the lowest sound intensity is about 1 trillionth (i.e. 0.0000000001%, just let that sink in) of the loudest sound intensity not yet damaging our ears.

Obviously, our brain filters most of what our ears hear because it is not directly relevant to us (people suffering from schizophrenia seem to lack this ability, with severe consequences). But is all the filtered sound simply being ignored, or can it still influence our (financial) behavior?

Behavioral research has discovered that priming can have a significant effect on our choices and behavior. Priming is the phenomenon where exposure to a specific stimulus can influence our reaction to further corresponding stimuli. Here is a quick example of it:

Think about the last time you took a shower.

Complete this word: S_ _P

What word came to your mind first? Chances are high that it was soap, not soup.

This happens because thinking about when you last took a shower primes your brain for words and activities related to that, which soap clearly is (but soup is not quite).

The question arising from above example is: How susceptible are we to priming, and what is the smallest stimulus (i.e. sound intensity, in the case of hearing) that primes our brain without us noticing it?

Answering this question still seems to be a hot topic among psychologists and behavioral scientists, so no definite conclusion here (yet). What can be thought of, though, are even more questions regarding this topic – especially from a behavioral finance standpoint.

Risky Choices

The human nervous system is an amazingly interconnected structure, with one small part being able to influence & regulate many cells of the body. The three major components that act in this so called “space-time extended” manner are the secretory hypothalamus, the autonomic nervous system ANS, and the diffuse modulatory system. Together, they shape our behavior in a manner that we might not even be able to actively influence.

Additionally, signals arriving in the central nervous system CNS are rarely just processed in the area of arrival but are relayed to, influenced by, and sometimes even suppressed by other areas. After all, we are not just simple “input-output” machines that operate according to strict (or as Finance usually calls it, rational) rules.

Related to this, there has been a lot of research recently on how humans evaluate & process financial risk. Can it really be broken down to, as traditional Finance tries to theoretically predict, a purely rational process or is there more goind on behind the curtains? Turns out, there is.

Two conceptually similar models on financial risk processing have been proposed in the past years, and both set an end to rationality: Risk processing is, at its core, a largely emotional process.

Above-mentioned models are the Anticipatory Affect Model (by Wu, Sacchet & Knutson, 2012) and the Risk Processing Model (by Mohr, Biele & Heekeren, 2010). In essence, both models suggest that a risky input is processed in different parts of the brain (depending on the magnitude of risk), and especially in parts that are responsible for emotional processes. Only in a later step, then, is a cognitive decision made; however, this decision is largely influenced by the underlying emotional evaluation (or affect) of a risky alternative.

Another study (Jung et al., 2018) has even found differences in structural and functional connections between the amygdala and the prefrontal cortex among individuals with varying risk preference. Risk averse individuals even seem to display similar amygdala – prefrontal cortex connectivity as individuals showing traits of anxiety.

These examples are yet again a great illustration of the highly complex processes going on in our brain when doing a presumably simple – or supposedly rational – task. Additionally, they prove that Finance (and really all fields of study dealing with humans) should not be oblivious to the findings and discoveries of neuroscientifical research.


A couple of weeks back in this blog we touched upon some interesting research relating to dopamine receptor activation, and the way in which this can influence the impulsiveness of our decisions.

Our attention in chapter 6 of the book was caught by Solomon H. Snyder’s account on how he and his colleagues successfully identified opiate receptors for the first time in the 1970s. During this period of time “hundreds of thousands of American soldiers” fighting in the Vietnam war were addicted to heroine, to such an extent that it was called an epidemic. One study estimated that during the war, 43% of the around 14 thousand men who returned from Vietnam had used some narcotics during their time in battle (Robbins et al., 1974). Even though the terrors of war are in practice unimaginable to us, it’s easy to understand at least a simple logic of why soldiers would resort to drugs in the midst of such chaos.

Why is it, however, that in everyday life people get addicted to drugs?

If one would really want to explore this question, there would surely be hundreds of points of views to take, even if only looking for academic explanations and answers. Sociological or economic rationales, for instance, have to our knowledge provided important insight for policy-making regarding drug addiction and abuse.

However, if looking at this question from the point of view of cellular-level action in the brain, earlier neuroscience research seems to have pointed at least a answer again to the same brain’s dopamine system and its provision of a feeling of instant gratification to the user. Drugs such as cocaine and methamphetamine cause nerve cells to release too much of the dopamine neurotransmitter, which can make one feel “euphoric”. In addition, your brain learns to release dopamine also not only due to the drugs but due to other cues that relate to the drug use, therefore disturbing your “reward circuit”.

From a behavioural economics or science point of view, such decision to pursue immediate satisfaction was also discussed during a lecture. Our lecturer talked about preferring chocolate – which in some research has also been proven to release dopamine, and at least influence other neurotransmitters – immediately in the moment or, for example, in two hours’ time. The economics research explained people’s inability to wait for gratification even for a couple of hours, by our time preferences for “consumption”. Given the same good now or in the near future, studies show we mostly prefer taking the product right away, and this can be modeled mathematically by discounting the utility received from a good into the future. Additionally, our lecturer pointed out that often humans are also incapable of making consistent choices over time.

Increasingly, however, there seems to be a view among neuroscientists that the effect of drugs is not only limited to their influence on the dopamine system, but also to cognitive patters stored in the frontal lobe. These include decision-making abilities, planning and memory. Therefore, there are surely even more areas of overlap for neuroscience and behavioural economics, when focusing on drug abuse and addiction.

Tasty Memories

This week’s topics revolved all around our different senses: Smelling, tasting, seeing, and how these inputs are being processed by our brain. Admittedly, making a sensible link between these topics and behavioral finance – besides the obvious connection of seeing what is happening around us, making sense of it, and reacting to it accordingly – makes writing this blog post a more difficult task. We found, however, some interesting parallels between our two subjects of interest.

Mmmmh, Pizza…

First stands the remarkable fact that smell and taste (which together form our perception of flavor) don’t pass through our brain as simple ad-hoc perceptions: the mouth-watering sensation of eating a pizza, or the sudden alarming sensation of your pizza getting burnt in the oven.

On the contrary, flavor perception is intrinsically linked with certain types of memory formation. To prove our point, simply go back two sentences and observe your reaction to reading about pizza. Most likely you WILL instantly get that mouth-watering feeling as if you are about to take a bite! Similarly, evoking some of our strongest memories are oftentimes tied to perceptions of smell and/or taste. The distinct smell of the house you grew up in, the perfume a loved one uses, etc.

All of this raises the question: How large is the potential effect flavor sensations can have on our behavior?

Scent Marketing

Even though you might never have heard of this term, you will most likely have “fallen for it” many times already. Scent Marketing is the deliberate and strategic use of scents to influence consumer behavior, affect brand perception, and ideally, increase buying tendency. (

If the scent dispersed in or by a clothing store, coffee shop, or bakery can have such a large impact on you, what could be the potential applications of this in Behavioral Finance? Could panic sales on Wall Street be mitigated by diffusing the soothing scent of lavender on the trading floor? 😉

A Tale of Two Tables

Coming back to visual perception, another very interesting concept that was covered in the Finance and Neuroscience courses is the “Table Illusion”.

When looking at the two tables below, which of the two would you say is longer, and which is wider?

Shepard’s Table Illusion (Source:

In fact, both have exactly the same dimensions! The interpretations of this illusion in Neuroscience and Behavioral Finance differ, however. Without going into too much detail in both:

  • Neuroscience: We perceive the two tables as having different dimensions because our brain is trying to use a 3D interpretation of a 2D illustration, leading to “errors” in size perception.
  • Behavioral Finance: Your intuitively & automatically thinking System 1 prematurely jumps to the conclusion that the tables’ dimensions are unequal. At the same time, we fail to scrutinize System 1’s suggestion and consider it to be true, because our deliberate & actively thinking System 2 (which would be responsible for this task), is lazy. In short, we fail to question our own initial conclusions.

These two explanations do not seem to have the same scope at first sight and tackle the problem from different angles. For us, however this is exactly what motivates us to not only look at Finance questions from a behavioral perspective, but also consider the possible neural origins behind it.

For more reading on the above-mentioned System 1 and System 2, we can highly recommend behavioral scientist & nobel-prize winner Daniel Kahneman’s book “Thinking, fast and slow”.

Disclosure: The authors’ don’t earn a commission on pizzas or books mentioned in this article being sold.

Dope-amine decisions

In recent lectures for a course in the Business School called Behavioural and Sustainable Finance, the hot topic has been human decision making. How do individuals evaluate the benefits and risks of different options, what kinds of personal traits guide us to choose certain alternatives and what larger scale systematic decision making patterns exist, are some of the questions behavioural economics and finance attempt to answer.

The approach to examine such questions has originated in psychology and revolves around comprehending different “heuristics and biases” that we humans demonstrate, by acting against a rational, economic value -maximising decision making which the more orthodox economics literature argues for.

Studying the synapse, and specifically chemical synapse this week, got us thinking about the links this neural could have with our decision making capabilities. Of course the most obvious connection is that in the first place, synapses are the basis for many of our cognitive abilities!

By a quick google search, however, we also found some interesting research on how different neurotransmitters affect our behaviour and decision making. For instance, Gaalen et al. (2006) studied how dopamine-related processes affect impulsive decision-making in rats. Their results showed that the rat’s ability to restrain from instant gratification, and therefore make a less impulsive decision, depended on the activation of their dopamine D1 receptor.

The study mentions that such understanding is important, for instance, for comprehending conditions such as ADHD or ADD. But these learnings perhaps speak also to the behaviour of larger groups and could help us understand why some people choose to make impulsive decisions on the stock market. One can therefore build interesting bridges between the two courses and topics!


Buy Na and K, not Gold or Silver!

When people think about (precious) metals they can buy to diversify their investment portfolios (to have a more crisis-safe place to put their hard earned savings in), the two obvious candidates are usually: gold and silver.

As we’ve recently learned in our course, however, there seem to be two much more valuable elements to keep an eye on: sodium (Na) and potassium (K) . Perhaps not from an investment, but at least from a neuroscience perspective.

While gold and silver are mainly shiny and look pretty, sodium and potassium have some real superpowers that we experience every day without even paying attention to: they are the main drivers of our neural impulses, or action potentials. Without sodium and potassium cations our neurons would not be able to generate & maintain their membrane potential and, when the neuron is being excited above threshold, change it in milliseconds to propagate a nerve impuls forward: we see, feel, hear, move, or think.

We take our hard earned savings and buy gold & silver with it. Literally every part of this sentence was enabled by sodium and potassium. The working, the thinking, the moving, and even us writing this blog post about it.

Time to give them the attention they deserve!