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Markowitz in the brain?

Preuschoff, Kerstin and Quartz, Steven and Bossaerts, Peter (2008) Markowitz in the brain? Revue d'Économie Politique, 118 (1). pp. 75-95. ISSN 0373-2630. doi:10.3917/redp.181.0075.

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We review recent brain-scanning (fMRI) evidence that activity in certain sub-cortical structures of the human brain correlate with changes in expected reward, as well as with risk. Risk is measured by variance of payoff, as in Markowitz’ theory. The brain structures form part of the dopamine system. This system had been known to regulate learning of expected rewards. New data show that it is also involved in perception, of expected reward, and of risk. The findings suggest that the brain may perform a higher-dimensional analysis of risky gambles, as in standard portfolio theory, whereby risk and expected reward are considered separately. That is, the human brain appears to literally record the very inputs that have become a defining part of modern finance theory.

Item Type:Article
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Bossaerts, Peter0000-0003-2308-2603
Additional Information:© 2008 Dalloz.
Subject Keywords:neurofinance - neuroeconomics - decision making under uncertainty - Markowitz - portfolio theory - dopaminergic - system
Issue or Number:1
Classification Code:Classification JEL : D87, D81, G11, C91
Record Number:CaltechAUTHORS:20170408-142951855
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:75954
Deposited By: 1Science Import
Deposited On:25 Apr 2017 20:25
Last Modified:15 Nov 2021 16:56

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