It is said by many neuroeconomists that what had caused the meltdown on Wall Street, aside from greed, lax regulation and panic, is maybe the very biological makeup of investors' brains. This assumption is based from a study conducted about eight years ago by a handful of brain scientists.
Brain imaging studies show that investors as a whole get more and more used to big returns, and thus, take bigger and bigger risks.
What we have seen and witnessed the past few weeks regarding the fate of a number of huge investment firms were enough proof that, indeed, the market is unpredictable, irrational and cruel.
According to a neuroeconomist from Emory University, Gregory Berns:
"Fear plus herding equals panic."
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