Finance - Research Publications
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ItemCaloric Primary Rewards Systematically Alter Time Perception(American Psychological Association, 2017-11-01)Human time perception can be influenced by contextual factors, such as the presence of reward. Yet, the exact nature of the relationship between time perception and reward has not been conclusively characterized. We implemented a novel experimental paradigm to measure estimations of time across a range of suprasecond intervals, during the anticipation and after the consumption of fruit juice, a physiologically relevant primary reward. We show that average time estimations were systematically affected by the consumption of reward, but not by the anticipation of reward. Compared with baseline estimations of time, reward consumption was associated with subsequent overproductions of time, and this effect increased for larger magnitudes of reward. Additional experiments demonstrated that the effect of consumption did not extend to a secondary reward (money), a tasteless, noncaloric primary reward (water), or a sweet, noncaloric reward (aspartame). However, a tasteless caloric reward (maltodexrin) did induce overproductions of time, although this effect did not scale with reward magnitude. These results suggest that the consumption of caloric primary rewards can alter time perception, which may be a psychophysiological mechanism by which organisms regulate homeostatic balance.
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ItemEndogenous formation of preferences: Choices systematically change willingness-to-pay for goods(American Psychological Association, 2017-12)Standard decision theory assumes that choices result from stable preferences. This position has been challenged by claims that the act of choosing between goods may alter preferences. To test this claim, we investigated in three experiments whether choices between equally valued snack food items can systematically shape preferences. We directly assessed changes in participants’ willingness-to-pay for these items, some of which could be bought at an auction after the experiment, while others could not. We found that chosen items were valued higher, and nonchosen items were valued lower; yet this postdecisional refinement of preferences was only observed for choices and valuations that were relevant, that is, incentive-compatible for items that were available for consumption. Supplementary analyses revealed that incentive-incompatible elicitations of preferences were unreliable and may have masked potential effects of choices on preferences. In conclusion, we propose that preferences can change endogenously, that is, in the absence of external feedback or information, but rather as a function of previous relevant choices.
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ItemFeedback discounting in probabilistic categorization: Converging evidence from EEG and cognitive modelling(Springer International Publishing, 2018)In simple probabilistic learning environments, the informational value of corrective feedback gradually declines over time. This is because prediction errors persist despite learners acquiring the contingencies between stimuli and outcomes. An adaptive solution to the problem of unavoidable prediction error is to discount feedback from the learning environment. We provide novel neural evidence of feedback discounting using a combination of behavioral modeling and electroencephalography (EEG). Participants completed a probabilistic categorization task while EEG activity was recorded. We used a model-based analysis of choice behavior to identify individuals that did and did not discount feedback. We then contrasted changes in the feedback-related negativity (FRN) for these two groups. For individuals who did not discount feedback, we observed learning-related reductions in the FRN that reflected incremental changes in choice behavior. By contrast, for individuals who discounted feedback, we found that the FRN was effectively eliminated due to the rapid onset of feedback discounting. The use of a feedback discounting strategy was linked to superior performance on the task, highlighting the adaptive nature of discounting when trial-to-trial outcomes are variable, but the long-term contingencies relating cues and outcomes are stable.
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ItemDissociating neural variability related to stimulus quality and response times in perceptual decision-making(Elsevier, 2018-03-01)According to sequential sampling models, perceptual decision-making is based on accumulation of noisy evidence towards a decision threshold. The speed with which a decision is reached is determined by both the quality of incoming sensory information and random trial-by-trial variability in the encoded stimulus representations. To investigate those decision dynamics at the neural level, participants made perceptual decisions while functional magnetic resonance imaging (fMRI) was conducted. On each trial, participants judged whether an image presented under conditions of high, medium, or low visual noise showed a piano or a chair. Higher stimulus quality (lower visual noise) was associated with increased activation in bilateral medial occipito-temporal cortex and ventral striatum. Lower stimulus quality was related to stronger activation in posterior parietal cortex (PPC) and dorsolateral prefrontal cortex (DLPFC). When stimulus quality was fixed, faster response times were associated with a positive parametric modulation of activation in medial prefrontal and orbitofrontal cortex, while slower response times were again related to more activation in PPC, DLPFC and insula. Our results suggest that distinct neural networks were sensitive to the quality of stimulus information, and to trial-to-trial variability in the encoded stimulus representations, but that reaching a decision was a consequence of their joint activity.
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ItemHealth warnings promote healthier dietary decision making: Effects of positive versus negative message framing and graphic versus text-based warnings(Elsevier, 2018-08-01)Food product health warnings have been proposed as a potential obesity prevention strategy. This study examined the effects of text-only and text-and-graphic, negatively and positively framed health warnings on dietary choice behavior. In a 2 × 5 mixed experimental design, 96 participants completed a dietary self-control task. After providing health and taste ratings of snack foods, participants completed a baseline measure of dietary self-control, operationalized as participants' frequency of choosing healthy but not tasty items and rejecting unhealthy yet tasty items to consume at the end of the experiment. Participants were then randomly assigned to one of five health warning groups and presented with 10 health warnings of a given form: text-based, negative framing; graphic, negative framing; text, positive framing; graphic, positive framing; or a no warning control. Participants then completed a second dietary decision making session to determine whether health warnings influenced dietary self-control. Linear mixed effects modeling revealed a significant interaction between health warning group and decision stage (pre- and post-health warning presentation) on dietary self-control. Negatively framed graphic health warnings promoted greater dietary self-control than other health warnings. Negatively framed text health warnings and positively framed graphic health warnings promoted greater dietary self-control than positively framed text health warnings and control images, which did not increase dietary self-control. Overall, HWs primed healthier dietary decision making behavior, with negatively framed graphic HWs being most effective. Health warnings have potential to become an important element of obesity prevention.
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ItemHard Decisions Shape the Neural Coding of Preferences(Society for Neuroscience, 2019-01-23)Hard decisions between equally valued alternatives can result in preference changes, meaning that subsequent valuations for chosen items increase and decrease for rejected items. Previous research suggests that this phenomenon is a consequence of cognitive dissonance reduction after the decision, induced by the mismatch between initial preferences and decision outcomes. In contrast, this functional magnetic resonance imaging and eye-tracking study with male and female human participants found that preferences are already updated online during the process of decision-making. Preference changes were predicted from activity in left dorsolateral prefrontal cortex and precuneus while making hard decisions. Fixation durations during this phase predicted both choice outcomes and subsequent preference changes. These preference adjustments became behaviorally relevant only for choices that were remembered and were in turn associated with hippocampus activity. Our results suggest that preferences evolve dynamically as decisions arise, potentially as a mechanism to prevent stalemate situations in underdetermined decision scenarios.
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ItemDocumenting the functional form of dynamic risk-taking behaviour in a real options context using sporting contests(Wiley, 2018-11-01)Changes in risk-taking behaviour based on interim performance are examined in high-stakes competition. A real options framework is used to provide a richer characterisation of risk-taking behaviour than examined in extant studies. This framework is applied to an examination of ball-by-ball data from 1207 cricket matches. Consistent with modelled expectations, risk taking is found to increase (decrease) at a decreasing rate following below par (above par) interim performance. This result is especially strong in situations where the resources remaining are low, a result predicted by the real options model.
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ItemMeasuring the Adequacy of Retirement Savings(Wiley, 2018-12-01)This paper introduces four metrics for quantifying the adequacy of retirement savings, taking into account all major sources of retirement income. We then apply them to projections of expected future retirement income streams of a representative sample of the Australian population aged 40 and above. We find that omitting one or more pillars of savings significantly biases estimates of retirement savings adequacy. We also find that the four metrics are only weakly correlated with key commonly used indicators of financial well‐being, in particular current income and net worth. Our analysis also points to several shortcomings of the widely used income replacement ratio as an indicator of savings adequacy.
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ItemDo brokers' recommendation changes generate brokerage? Evidence from a central limit order market(Wiley, 2019-03-01)We examine the short‐term response to recommendation changes on the Australian Securities Exchange, a central limit order market. In both central limit order markets and dealer‐driven markets, clients may reward the recommending broker with increased trade volumes. But a central limit order market does not have mandatory market makers and hence provides greater opportunity to free ride. We find evidence supporting the hypothesis that recommending brokers are rewarded with higher trade volumes and brokerage commission. Consistent with the tipping hypothesis, these rewards are concentrated in the period shortly before the release. There is no evidence of free riding.