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What if versus probabilistic scenarios: a neuroscientific analysis

  • S.I.: Recent Developments in Financial Modeling and Risk Management
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Abstract

Nowadays financial products are extremely complex and the decision to choose among them could represent a stressful event for individuals. Information related to the risk/return profile of an investment instrument and the way it is represented (framing effect) are crucial in determining the outcome of individuals’ decisions. In this paper we consider two schemes that can be employed to represent the random performances of risky financial products, namely the what if and probabilistic scenarios frames. This paper aims at measuring the impact of the two above mentioned schemes on investors’ decision accuracy and peripheral nervous system activity. In particular, the goal is twofold: (1) to investigate the behavioural and physiological indexes elicited in the decision-making process of investors who have to choose on the basis of the two different schemes; (2) to investigate on the effect of time pressure when probabilistic scenarios or what if frames are used. The first point is investigated by means of a decision making task, while the second one by means of a perceptual one.

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Authors and Affiliations

  1. University of Rome Unitelma-Sapienza, Rome, Italy

    Rosella Castellano & Gaetano Tieri

  2. School in Economics and Finance, Sapienza University of Rome, Rome, Italy

    Marco Mancinelli

  3. Department of Psychology, Sapienza University of Rome, Rome, Italy

    Giorgia Ponsi

  4. Social Neuroscience Laboratory, IRCCS Fondazione Santa Lucia, Rome, Italy

    Giorgia Ponsi & Gaetano Tieri

Authors
  1. Rosella Castellano
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  2. Marco Mancinelli
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  3. Giorgia Ponsi
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  4. Gaetano Tieri
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Correspondence to Rosella Castellano.

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Castellano, R., Mancinelli, M., Ponsi, G. et al. What if versus probabilistic scenarios: a neuroscientific analysis. Ann Oper Res 299, 331–347 (2021). https://doi.org/10.1007/s10479-019-03272-5

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