The Biology of Bubble and Crash

Found via Canadian Value Investing.

WHAT happens to your body when you take risks? What happens to it when you make or lose money? Economics rarely asks these questions. It tends to view the assessment of financial risk as a purely intellectual affair, involving the calculation of asset returns, probabilities and allocation of capital. It is economics from the neck up.

But to this bloodless account of decision making, I want to add some guts. Advances in neuroscience and physiology have shown that when we take risk, we do a lot more than just think about it. We prepare for it physically.