Why do some people invest with high risk, while other use caution, and some don’t invest at all? Is it determined in your DNA or your hormones? Dr. John Nofsinger raised these questions in his Hampton Roads Chamber Strome Presentation “The Psychology and Biology of Investing.” Nofsinger is Interim Dean and the William H. Seward Endowed Chair in International Finance at the College of Business & Public Policy, University of Alaska Anchorage. He is one of the world’s leading experts in behavioral finance.
The Hampton Roads Chamber and the Strome College of Business work together as inspiring ignitors to bring dynamic economists to speak to Chamber Members and Old Dominion University students. Nofsinger says yes, risky behavior is in your DNA, and researchers have traced it to the testosterone you were exposed to in the uterus. Nofsinger spoke about the research done with identical twins formed with one egg and one sperm. Their investment habits tend to be almost identical as well.
Researchers have linked investment behavior to sleep deprivation, circulating hormone levels (such as testosterone), emotions, mood, or the environment (such as the weather). Fleeting changes in behavior can be attributed to physical and mental health status. The permanent behavior is rooted in your genetic code and gender. Hormone fluctuations, specifically testosterone and cortisol, will also affect investment behavior. Increased testosterone tends to lead to risky or reckless behavior, while high cortisol levels lead to cautious investments. Even the quality of the air can cloud judgment on investing.
Nofsinger says studies show "the sweet spot for smart investing is around 50 years old. You still have the cognitive abilities of youth and now have the wisdom of experience." Nofsinger urges investors who may be tending towards risky moves to contact a person they know will "slow them down." Sometimes balancing all the factors around you and seeking outside guidance is needed to make the right decision on an investment strategy."
Professor Nofsinger has authored/coauthored fourteen finance trade books, textbooks, and scholarly books that have been translated into eleven languages. The two books, The Psychology of Investing and The Biology of Investing, are popular with investment advisors.
Thank you to Andrew Hodge with Atlantic Union Bank, our presenting sponsor. Hodge said they have continued this sponsorship for three years because Atlantic Union believes in lifelong learning. Thank you to Dean Jeff Tanner at the Old Dominion University Strome College of Business for this partnership with the Hampton Roads Chamber.
To view Dr. John Nofsinger’s PowerPoint slides, click here.