Why some people are reluctant to invest in stock market?

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London, July 26 (IANS) Despite long-term profit expectations, a higher brain activity may be cautioning people against buying stocks — supposed to be a risky form of investment, suggest a study.

The findings shows that the cortical regions of the brain– “anterior insular” –found in both hemispheres of the cerebral cortex — is more active amongst people who do not trade stocks.

Both the left and right variants of this brain region is particularly active in people who are more reluctant to buy stocks.

“The anterior insular cortex acts like a stop sign and thus cautions against risky decisions,” said Alexander Niklas Hausler, doctoral student at the University of Bonn in Germany.

However, in experienced stock traders, the activity of this region of the brain is lower.

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“The attitude towards riskier or less risky decisions showed a stronger correlation to the actual behaviour than the reward outcomes,” Hausler said.

For the study, detailed in the journal “Scientific Reports”, the team examined a total of 157 male subjects aged 29 to 50 years.

In addition to already known economic factors such as income and education, the researchers found that risk optimism and tolerance in particular have a major influence on stock purchase decisions.

The study showed that the individuals with more risk optimism are firmly convinced that investing in stocks leads to high profits.

Both, factors also play an important role in the relationship between the “anterior insular” and the purchase of stocks in real life.

Here, they act as a mediator between brain activity and the real-life stock trading behaviour, the researchers said.

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–IANS

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