MONTREAL—Rational calculations do not dictate financial decisions, as psychologists have revealed in recent years. Emotions often sway our spendthrift or miserly ways. In particular, positive feelings promote risk taking—gambling in Vegas, say, or going on a shopping spree—whereas bad moods prompt protective selling or saving. In some cases, our feelings may have an obvious origin: studies show that sunshine breeds stock surges, whereas clouds curtail purchasing. But much of what influences our spending is far more subtle—subliminal, in fact. Now psychology graduate student Julie L. Hall of the University of Michigan reports at the Cognitive Neuroscience Society 2010 annual meeting that subconscious emotional cues have a far greater impact on financial risk taking than conscious ones do. What is more, one particular brain region mediates the connection between what influences our feelings and the financial decisions we make.



Hall and her colleagues used functional magnetic resonance imaging to scan the brains of 24 men and women while the subjects glanced at happy, angry and neutral faces of the sort that, according to previous research, can affect an onlooker's mood. Some of these faces were clearly visible, whereas others flashed so briefly—appearing for a mere 30 milliseconds—that the subjects could not consciously see their expressions. After viewing each face, the men and women were supposed to perform a simulated investment task: choosing between two risky, high-payoff stocks and a safe, low-payoff bond.



As expected, the investigators found that viewing the happy faces caused the subjects to pick the riskier financial alternative—that is, the stocks—far more often than seeing the neutral faces did. The happy visage also triggered a flurry of activity in a brain region called the nucleus accumbens, which has long been associated with the processing and anticipation of rewards such as food, money and drugs. But the expressions that had the greatest effect on both risk taking and the activity of the nucleus accumbens were the ones that people could not consciously process, suggesting that mood-altering cues that matter most to our bank accounts—and the stock market—are not obvious ones like the weather but rather those that buffet our emotions beneath our awareness.



Thus, Hall suggests, people might make better financial choices if they learned to recognize their own moods—in part by becoming more alert to the environmental cues and experiences that contribute to them—before deciding to splurge on a fancy sports car or gamble on a dicey stock. "When investors are experiencing large gains in the stock market, they are likely to feel extremely happy and confident, which may lead them to ignore risks, which could in turn could lead to losses," Hall says. Knowing that such euphoria could be financially perilous, an individual might be able to put the brakes on his or her spending. And if a consumer can't intuit his or her own risky state of mind, a brain scanner can: electrical commotion in the nucleus accumbens not only parallels a person's propensity for positive thinking but also is the neural barometer of financial risk taking.