And it is all in our brain. Greed and panic – the two primal human emotions – are regulated by specific regions in our brain, and they in turn control how we as investors react to market unpredictability. In an insightful article today, Jason Zweig discusses the latest advances in neuroeconomics, the branch of science that probes human brain to understand investor behavior.

When we fail to find a rational explanation for market swings, biology comes to our rescue. Growing economy dictates the long term market trends, but its short-term fluctuations are directly linked to investor psychology, each feeding off the other. By identifying the specific biological mechanisms operating in our brain, it may be possible to understand why we – rational beings in almost every other aspect of our lives – are under such strong grips of emotion when it comes to investing. Read Jason’s article.

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