Risk Related Brain Regions Detected with 3D Image FPCA

31 Pages Posted: 14 Jul 2015

See all articles by Ying Chen

Ying Chen

National University of Singapore (NUS)

Wolfgang K. Härdle

Blockchain Research Center; Xiamen University - Wang Yanan Institute for Studies in Economics (WISE); Charles University; National Yang Ming Chiao Tung University; Humboldt University of Berlin - Center for Applied Statistics and Economics (CASE)

Qiang He

National University of Singapore (NUS) - Department of Statistics and Applied Probability

Piotr Majer

Humboldt University of Berlin - Center for Applied Statistics and Economics (CASE)

Date Written: July 13, 2015

Abstract

Risk attitude and perception is reflected in brain reactions during RPID experiments. Given the fMRI data, an important research question is how to detect risk related regions and to investigate the relation between risk preferences and brain activity. Conventional methods are often insensitive to or misrepresent the original spatial patterns and interdependence of the fMRI data. In order to cope with this fact we propose a 3D Image Functional Principal Component Analysis (3D Image FPCA) method that directly converts the brain signals to fundamental spatial common factors and subject-specific temporal factor loadings via proper orthogonal decomposition. Simulation study and real data analysis show that the 3D Image FPCA method improves the quality of spatial representations and guarantees the contiguity of risk related regions. The selected regions provide signature scores and carry explanatory power for subjects' risk attitudes. For in-sample analysis, the 3D Image method perfectly classifies both strongly and weakly risk averse subjects. In out-of-sample, it achieves 73-88% overall accuracy, with 90-100% rate for strongly risk averse subjects, and 49-71% for weakly risk averse subjects.

Keywords: Decision Making; fMRI; Neuroeconomics; Risk Attitude; RPID.

JEL Classification: C3, C6, C9, C14, D8.

Suggested Citation

Chen, Ying and Härdle, Wolfgang K. and He, Qiang and Majer, Piotr, Risk Related Brain Regions Detected with 3D Image FPCA (July 13, 2015). Available at SSRN: https://ssrn.com/abstract=2630310 or http://dx.doi.org/10.2139/ssrn.2630310

Ying Chen

National University of Singapore (NUS) ( email )

1E Kent Ridge Road
NUHS Tower Block Level 7
Singapore, 119228
Singapore

Wolfgang K. Härdle (Contact Author)

Blockchain Research Center ( email )

Unter den Linden 6
Berlin, D-10099
Germany

Xiamen University - Wang Yanan Institute for Studies in Economics (WISE) ( email )

A 307, Economics Building
Xiamen, Fujian 10246
China

Charles University ( email )

Celetná 13
Dept Math Physics
Praha 1, 116 36
Czech Republic

National Yang Ming Chiao Tung University ( email )

No. 1001, Daxue Rd. East Dist.
Hsinchu City 300093
Taiwan

Humboldt University of Berlin - Center for Applied Statistics and Economics (CASE)

Unter den Linden 6
Berlin, D-10099
Germany

Qiang He

National University of Singapore (NUS) - Department of Statistics and Applied Probability ( email )

Block S16, Level 7
6 Science Drive 2
117546
Singapore

Piotr Majer

Humboldt University of Berlin - Center for Applied Statistics and Economics (CASE) ( email )

Spandauer Strasse 1
Berlin, D-10178
Germany

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