Technology, with its considerable might, is increasingly invading human psychology to understand how and why we respond to financial cues the way we do. Rarely does anything churn our emotions as much as the myriad decisions we face every day about spending/saving/investing our money.

And because the biological root of all emotions lies in the 3lb gray matter sitting atop our neck, it seems only logical to use advanced devices, such as functional magnetic resonance imaging (fMRI), to probe into the deep recesses of a human brain. We already have neuroeconomics, which studies investor behavior in response to market movements.

And now there is neuromarketing. The idea here is to scan the brain activity of prospective consumers as they are exposed to different types of promotional ads, so the businesses can fine tune their strategy to get the biggest bang for their bucks. There are some early results already; for example, “ads congruent with their environment outperform those that are incongruent”.

In other words, those banner ads that fit best with the context of your blog pages should get you most money. Simple logic, right? Hardly requires brain imaging. There are always such debates when a new study comes around: if neuromarketing is going to be any better than the conventional analysis based on human behavior (such as this) that are already available. Also there are questions, like whether consumer reactions to an ad are at all predictive of their buying habits.

These are early days yet. Science and technology will certainly mature with time, and maybe we will see the day soon when ads are better mapped to our preferences.

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.