Expected Value Information Improves Financial Risk Taking Across the Adult Life Span

Social Cognitive and Affective Neuroscience, Vol. 6, No. 2, pp. 207–217, 2011

11 Pages Posted: 28 Mar 2016

See all articles by Gregory R. Samanez-Larkin

Gregory R. Samanez-Larkin

Yale University - Department of Psychology

Anthony D. Wagner

Stanford University - Psychology

Brian Knutson

Stanford University - Psychology

Date Written: 2011

Abstract

When making decisions, individuals must often compensate for cognitive limitations, particularly in the face of advanced age. Recent findings suggest that age-related variability in striatal activity may increase financial risk-taking mistakes in older adults. In two studies, we sought to further characterize neural contributions to optimal financial risk taking and to determine whether decision aids could improve financial risk taking. In Study 1, neuroimaging analyses revealed that individuals whose mesolimbic activation correlated with the expected value estimates of a rational actor made more optimal financial decisions. In Study 2, presentation of expected value information improved decision making in both younger and older adults, but the addition of a distracting secondary task had little impact on decision quality. Remarkably, provision of expected value information improved the performance of older adults to match that of younger adults at baseline. These findings are consistent with the notion that mesolimbic circuits play a critical role in optimal choice, and imply that providing simplified information about expected value may improve financial risk taking across the adult life span.

Keywords: aging, decision making, learning, memory, reward, fMRI, investment decision making, neurofinance, experimental finance

JEL Classification: C91, D81, D83, D87, G11, J14

Suggested Citation

Samanez-Larkin, Gregory R. and Wagner, Anthony D. and Knutson, Brian, Expected Value Information Improves Financial Risk Taking Across the Adult Life Span (2011). Social Cognitive and Affective Neuroscience, Vol. 6, No. 2, pp. 207–217, 2011. Available at SSRN: https://ssrn.com/abstract=2755536

Gregory R. Samanez-Larkin (Contact Author)

Yale University - Department of Psychology ( email )

P.O. Box 208205
New Haven, CT 06520-8205
United States

Anthony D. Wagner

Stanford University - Psychology ( email )

Stanford, CA 94305
United States
(650) 723-4048 (Phone)
(650) 725-5699 (Fax)

HOME PAGE: https://psychology.stanford.edu/awagner

Brian Knutson

Stanford University - Psychology ( email )

Stanford, CA 94305
United States
650 723 7431 (Phone)
650 725 5699 (Fax)

HOME PAGE: http://psychology.stanford.edu/~knutson

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