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ture: Review of Neuroscience 1: 59–65.
11. Williams, L. M., K. J. Brown, D. Palmer, et al. 2006. “The Mellow Years?:Neural Basis of Improving Emotional Stability over Age.” Journal ofNeuroscience 26(24) (June 14): 6422–6430.
12. Hedden, T., and J. D. Gabrieli. 2005. “Healthy and Pathological Pro-cesses in Adult Development: New Evidence from Neuroimaging ofthe Aging Brain.” Current Opinion in Neurology 18(6) (December):740–747.
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13. Marschner, A., T. Mell, I. Wartenburger, et al. 2005. “Reward-BasedDecision-Making and Aging.” Brain Research Bulletin 67(5) (Novem-ber 15): 382–390 (Epub July 11, 2005).
14. See note 8.15. Reyna, V. R. 2004. “How People Make Decisions that Involve Risk: ADual-Processes Approach.” Current Directions in Psychological Sci-ence 13: 60–66.
16. Kuhnen, C., and B. Knutson. 2006. Presentation by Camelia Kuhnento the Stanford Institute of Theoretical Economics (SITE) conference.August 14, Stanford University.
17. Schaie, K. W. 2005. “What Can We Learn From Longitudinal Stud-ies of Adult Development?” Research in Human Development 2(3):pp. 133–158.
18. Schaie, K. W. 2005. Developmental Inﬂuences on Adult Intelligence:The Seattle Longitudinal Study. New York: Oxford University Press,p. 127.
19. Ibid.20. Tueth, M. J. 2000. “Exposing Financial Exploitation of Impaired ElderlyPersons.” American Journal of Geriatric Psychiatry 8 (May): 104–111.
21. Weber, E. U., C. K. Hsee, and J. Sokolowska. 1998. “What Folklore TellsUs about Risk and Risk Taking: Cross-Cultural Comparisons of Amer-ican, German, and Chinese Proverbs.” Organizational Behavior andHuman Decision Processes 75(2) (August): 170–186.
22. Fan, J. X., and J. J. Xiao. 2003. “Cross-Cultural Differences in Risk Tol-erance: A Comparison between Chinese and Americans.” ConsumerInterest Annual 49. The proceedings of the 49th annual conference.April 2–5, 2003 (Atlanta, GA).
23. See note 12.24. See note 18.25. Lau, L-Y., and R. Ranyard. 2005. “Chinese and English ProbabilisticThinking and Risk Taking in Gambling.” Journal of Cross-CulturalPsychology 36: 621–627.
26. Weber, E., D. Ames, and A-R. Blais. 2005. “‘How Do I Choose Thee? LetMe Count the Ways: A Textual Analysis of Similarities and Differencesin Modes of Decision Making in the USA and China.” Management andOrganization Review 1(1) (March): 87–118.
27. Chen, G. M., K. A. Kim, J. R. Nofsinger, and O. M. Rui. 2005. “Behav-ior and Performance of Emerging Market Investors: Evidence fromChina.” (Version: October 2005). Unpublished Washington State Uni-versity working paper. www.darden.virginia.edu/batten/emipm/PDFs/EmergMarkConf Chinese Behavior.pdf.
28. Ibid.
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29. Liu, Y-J., C-L. Tsai, M-C. Wang, and N. Zhu. 2006. “House Money Effect:Evidence from Market Makers at Taiwan Futures Exchange” (April).http://faculty.gsm.ucdavis.edu/∼nzhu/papers/housemoney.pdf.
30. Locke, P. R., and S. C. Mann. 2004. “Prior Outcomes and Risky Choicesby Professional Traders.” Working paper. http://home.gwu.edu/∼plocke/prioroutcomes.pdf.
31. Chen, G., O. Rui, and Y. Xu. 2006. “When Will Investors Herd?: Ev-idence from the Chinese Stock Markets.” Working paper, School ofManagement, The University of Texas at Dallas, November 2003.http://ccfr.org.cn/cicf2005/paper/20050113024448.pdf.
32. Ng, L., and F. Wu. 2006. “Peer Effects in Investor Trading Deci-sions: Evidence from a Natural Experiment.” Working paper. https://wpweb2.tepper.cmu.edu/wfa/wfasecure/upload/2006 5.768332E+07PeerEffects WFA05.pdf.
Chapter 21: Emotion Management
1. Kasser, T., and R. M. Ryan.1996 “Further Examining the AmericanDream: Differential Correlates of Intrinsic and Extrinsic Goals.” Per-sonality and Social Psychology Bulletin 22(3): 280–287.
2. Farrell, P. “Bobby Badﬁngers’ Big Secret about Retiring!” Mar-ketwatch.com. Last update: 5:36 P.M. ET, August 2, 2006. www.marketwatch.com/News/Story/Story.aspx?guid=%7B6A52568C-C650-4AFA-B654-407520B4EA6D%7D&siteid=mktw.
3. McCall, R. D. 1997. Way of Warrior Trader: The Financial Risk-Taker’s Guide to Samurai Courage, Conﬁdence and Discipline. NewYork: McGraw-Hill.
4. Ritholtz, B. 2005. “Apprenticed Investor: The Zen of Trading.”RealMoney.com. Published online June 1, 2005, 11:37 A.M. EDT.www.thestreet.com/comment/barryritholtz/10226021.html.
5. Vohs, K. D., N. L. Mead, and M. R. Goode. 2006. “The Psychological Con-sequences of Money.” Science 314(5802) (November 17): 1154–1156.6. Lykken, D., and A. Tellegen. 1996. “Happiness Is a Stochastic Phe-
nomenon.” Psychological Science 7(3): 186–189.
7. Diener, E., E. Suh, R. Lucas, and H. Smith. 1999. “Subjective Well-Being:Three Decades of Progress.” Psychological Bulletin 125(22): 276–302.8. Frederick, S., and G. Loewenstein. 1999. “Hedonic Adaptation.” Well-Being: The Foundations of Hedonic Psychology. Russell Sage Founda-tion Press: New York City.
9. Brickman, P., D. Coates, and R. Janoff-Bulman. 1978. “Lottery Winnersand Accident Victims: Is Happiness Relative?” Journal of Personalityand Social Psychology 36: 917–927.
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10. Dijkers, M. 1997. “Quality of Life after Spinal Cord Injury: A MetaAnalysis of the Effects of Disablement Components.” Nature 35(12):829–840.
11. Lyubomirksy, S., L. Sousa, and R. Dickerhoof. 2006. The Costs and Ben-eﬁts of Writing, Talking, and Thinking about Life’s Triumphs and De-feats. Journal of Personality and Social Psychology 90: 692–708.12. Begley, S. 2004. “Scans of Monks’ Brains Show Meditation Alters Struc-ture, Functioning.” Wall Street Journal: Science Journal, November 5.13. Lutz, A., L. Greischar, N. Rawlings, et al. 2004. Proceedings of the Na-tional Academy of Sciences 101(46) (November 16): 16369–16373.
14. See note 15.15. Cook, M. 2006. ‘What Makes a Trader Successful.” Handout at the Tech-
nical Securities Analysts of San Francsico Annual Conference.
16. Raschke, L. B. 1999.
“Swing Trading: Rules and Philosophy.”Downloaded on October 9, 1999, from: www.mrci.com/lbr/swgrules/index.cfm.
17. See note 18.18. Steenbarger, B. 2005. “Trading Journals that Work.” BrettSteen-barger.com, July 30. Downloaded on October 1, 2006, from: www.brettsteenbarger.com/articles.htm.
19. Steenbarger B. 2005.
“When Trading Journals Don’t Work.”Trade2Win.com. August 18. Downloaded on October 1, 2006, from:www.trade2win.com/knowledge/articles/general%20articles/when-trading-journals-dont-work.
Chapter 22: Change Techniques
1. Beck, J. S. 1995. Cognitive Therapy: Basics and Beyond. New York:
Guilford Press.
2. Shannahoff-Khalsa, D. S. 2004. “An Introduction to Kundalini YogaMeditation Techniques that Are Speciﬁc for the Treatment of Psychi-atric Disorders.” Journal of Alternative and Complementary Medicine10(1) (February): 91–101.
3. Woolery, A., H. Myers, B. Sternlieb, and L. Zeltzer. 2004. “A Yoga In-tervention for Young Adults with Elevated Symptoms of Depression.”Alternative Therapies in Health and Medicine 10(2) (March-April):60–63.
4. Jensen, P. S., and D. T. Kenny. 2004. “The Effects of Yoga on the Atten-tion and Behavior of Boys with Attention-Deﬁcit/Hyperactivity Disor-der (ADHD).” Journal of Attention Disorders7(4) (May): 205–216.5. Sharma, K., and V. Shukla. 1988. “Rehabilitation of Drug-Addicted Per-sons: The Experience of the Nav-Chetna Center in India.” Bulletin onNarcotics 40(1): 43–49.
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6. See note 3.7. Center for Mindfulness in Medicine, Health Care, and Society (CFM).“Mindfulness-Based Stress Reduction Program Brochure.”
2006.www.umassmed.edu/cfm/srp/.
8. Davidson, R. J., J. Kabat-Zinn, J. Schumacher, et al. 2003. “Psychoso-
matic Medicine 65: 564–570.
9. Speca, M., L. Carlson, E. Goodey, and M. Angen. 2000. “A Random-ized, Wait-List Controlled Clinical Trial: The Effect of a MindfulnessMeditation-Based Stress Reduction Program on Mood and Symptomsof Stress in Cancer Outpatients.” Psychosomatic Medicine 62: 613–622.
10. Schwartz, G. E., R. J. Davidson, and D. J. Goleman. 1978. “Patterningof Cognitive and Somatic Processes in the Self-Regulation of Anxiety:Effects of Meditation versus Exercise.” Psychosomatic Medicine 40:321–328.
11. Arnold, L. E. 2001. “Alternative Treatments for Adults with Attention-Deﬁcit Hyperactivity Disorder (ADHD).” Annals of the New YorkAcademy of Sciences 931 (June): 310–341.
12. Kristeller, J., and T. Johnson. 2003. “Cultivating Loving-Kindness: ATwo-Stage Model for the Effects of Meditation on Compassion, Altru-ism and Spirituality. Portions presented at the conference: Works ofLove: Scientiﬁc and Religious Perspectives on Altruism.” Villanova Uni-versity, Villanova, Pennsylvania, June 3.
13. Murphy, S., and D. Hirschhorn. 2001. The Trading Athlete: Winningthe Mental Game of Online Trading. New York: John Wiley & Sons,p. 52.14. Ibid.15. Steenbarger, B. 2005. “How Experts Make Decisions Under Uncertainty—Part II.” BrettSteenbarger.com, July 30. www.brettsteenbarger.com/articles.htm
16. Cymbalista, F., and D. MacRae. 2004. “George Soros: How He KnowsWhat He Knows: Part 1: The Belief in Fallibility.” Stocks, Futures, andOptions, March 8.
17. Personal e-mail correspondence, May 2006.18. Lyubomirsky, S., K. M. Sheldon, and D. Schkade. 2005. “Pursuing Hap-piness: The Architecture of Sustainable Change.” Review of GeneralPsychology 9: 111–131.
19. Sheldon, K., and S. Lyubomirsky. 2006. “How to Increase and SustainPositive Emotion: The Effects of Expressing Gratitude and VisualizingBest Possible Selves.” Journal of Positive Psychology 1: 73–82.
20. Lyubomirsky, S., C. Tkach, and M. R. DiMatteo. 2006. “What Are the Dif-ferences between Happiness and Self-Esteem? Social Indicators Re-search (September) v78, n3, 363–404.
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21. See note 19.22. deCharms, R., F. Maeda, G. Glover, et al. 2005. “Control overBrain Activation and Pain Learned by Using Real-Time FunctionalMRI.” Proceedings of the National Academy of Sciences 102(51)(December 20): 18626–18631.
23. Ibid.24. Mangels, J. A., B. Butterﬁeld, J. Lamb, C. Good, and C. S. Dweck. 2006.“Why do beliefs about intelligence inﬂuence learning success? A socialcognitive neuroscience model.” Social Cognitive and Affective Neuro-science. 1(2): 75–86.
25. Bronson, P. 2007. “How Not to Talk to Your Kids: The Inverse Power of
Praise.” New York Magazine, February 19.
Chapter 23: Behavioral Finance Investing
1. Lefevre, E. 1923. Reminiscences of a Stock Operator. American Re-
search Council.
2. Drobny, S. 2006. Inside the House of Money. Hoboken, N. J.: John
Wiley & Sons.
3. “Brazil and the IMF: A Matter of Faith.” The Economist, August 15,
2002.
4. Li, F., 2006. “Do Stock Market Investors Understand the Risk Sen-timent of Corporate Annual Reports?” April 21. Available at SSRN:http://ssrn.com/abstract=898181.
5. Fama, E., and K. French. 1992. “The Cross-Section of Expected Stock
Returns,” Journal of Finance 47(2): 427–465.
6. Dimson, E., S. Nagel, and G. Quigley. 2003. “Capturing the Value Pre-mium in the UK 1955–2001.” Financial Analysts Journal 59: 35–45.7. Jegadeesh, N., and S. Titman. 1993. “Returns to Buying Winners andSelling Losers: Implications for Stock Market Efﬁciency.” Journal ofFinance 48(1): 65–91.
8. Watkins, B. 2004. “Riding the Wave of Sentiment: An Analysis of ReturnConsistency as a Predictor of Future Returns.” Journal of BehavioralFinance, April.
9. Lee, C., and B. Swaminathan. 2000. “Price Momentum and Trading Vol-
ume.” Journal of Finance 55(5) (October): 2017.
10. Chan, W. 2002. “Stock Price Reaction to News and No-News. Driftand Reversal after Headlines.” Cambridge: MIT Sloan School of Man-agement, working paper. Downloaded on September 1, 2006, from:http://jfe.rochester.edu/02207.pdf.
11. DeBondt, W., and R. Thaler. 1985. “Does the Stock Market Overreact?”
Journal of Finance 40: 793–805.
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12. Kothari, S. P., and J. Shanken. 2002. “Anomalies and Efﬁcient Portfolio
Formation,” The Research Foundation of AIMR Publications.
13. Trueman, B., F. M. H. Wong, and X-J. Zhang. 2003. “Anomalous StockReturns around Internet Firms’ Earnings Announcements.” Journal ofAccounting and Economics 34(1) (January): 249–271(23).
14. Peterson, R. 2002. “‘Buy on the Rumor:’ Anticipatory Affect and In-vestor Behavior.” Journal of Psychology and Financial Markets 3(4),218–226.
15. Peterson R. 2005. “Buy on the Rumor and Sell on the News.” In Ong, M.(ed.), Risk Management. New York: Academic Press: pp. 677–698.16. “LGT Investment Products—Active Management and Innovative In-from:
vestment Philosophies.” Downloaded on October 1, 2006,www.lgt-capital-management.com/cm/en/anlagefonds/.
17. “Investorama 2006.” Downloaded on December 1, 2006, from: www.lgt-capital-management.com/cm/en/downloads/dok marktinformationen/Investorama 1206 en.pdf.
18. http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data library.
html.
19. “Dimensions.” Downloaded on October 1, 2006, from: www.dfaus.com/
philosophy/dimensions/.
20. Thaler, R., and S. Benartzi. 2004. “Save More Tomorrow: Using Behav-ioral Economics to Increase Employee Saving.” Journal of PoliticalEconomy 112: S164–S187.
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Affect. Feeling or emotion, especially as manifested by facial expressionor body language. Affect can refer to the entire range of emotion-relatedmental experience. Attitudes, preferences, emotions, feelings, and moodsare all affective processes.
Agreeableness. Agreeableness reﬂects individual differences in concernwith cooperation and social harmony. Agreeable individuals value gettingalong with others.
Ambiguity. The existence of several possible meanings or implications,including conﬂicting attitudes or feelings.
Amphetamines. Amphetamines are stimulant medications that block theneuronal reuptake of norepinephrine and dopamine, increasing concentra-tions of these neurotransmitters in the synaptic cleft. Derivatives of am-phetamine include commerical medications used to treat attention-deﬁcithyperacticity disorder (ADHD) such as methylphenidate (Ritalin, Con-certa) amphetamine-dextroamphetamine (Adderall), and others. Metham-petamines (d-amphetamine) are an easily manufactured and neurotoxicform of amphetamines used recreationally for intoxication—leading tooverconﬁdence, euphoria, sexual arousal, improved stamina, and vigilance.In the 1950s and 1960s amphetamine medications were prescribed as “pick-me-up” pills, but they are now FDA schedule II (prescribed only with spe-cial prescription pads and government clearance).
Amygdala. A limbic system structure with a key role in aggression andfear, as well as emotional memory.
Analyst (ﬁnancial). Professional who studies companies, analyzes ﬁnan-cial statements, interviews corporate executives, and attends investmentpresentations to write reports recommending either purchasing, selling, orholding various stocks. Also called securities analyst or investment analyst.
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Anterior cingulate cortex (ACC). Cortex along the medial ﬁssure. TheACC is vital to cognitive functions, such as reward anticipation, decisionmaking, empathy, and emotion. Neuroscientists indicate the dorsal ante-rior cingulate cortex is primarily related to rational cognition while theventral is more related to emotional cognition.
Anterior insula. Cortex tissue located within the depths of the lateral ﬁs-sure beneath the frontal, temporal, and parietal folds. It overlies the puta-men.
Anticipation. Foreknowledge, intuition, and presentiment. Anticipationis a state of expectancy in which a known outcome is understood to beforthcoming.
Anxiety (worry/concern/dread). Anticipation of negative events, creat-ing feelings of unease and discomfort. Leads to activation of the sympa-thetic nervous system and release of stress hormones such as cortisol andneurotransmitters such as norepinephrine.
Arbitrage. The purchase of securities on one market for immediate resaleon another market in order to proﬁt from a price discrepancy.
Arousal. Physiological activation, often characterized by somatic signsincluding sweating, tremulousness, hypervigilance, pupil dilation, and ex-citability.
Attention deﬁcit–hyperactivity disorder (ADHD). Cognitive control,deﬁned as the ability to suppress inappropriate thoughts and actions, iscompromised in ADHD.
Authority. An expert whose views are taken as deﬁnitive.
Belief. Any thoughts held as logically true.
Benzodiazepines. Compounds that reduce anxiety. Synthetic versions in-clude Valium, Xanax, Ativan, and Klonopin. They appear to act on thebrain’s gamma-aminobutyric acid (GABA) receptors.
“Big Five.” The “Big Five” personality traits comprise the classiﬁcationof a person’s personality into the categories of neuroticism, extraversion,agreeableness, conscientiousness, and openness to experience. The BigFive are ﬁve broad factors or dimensions of personality traits discovered
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through empirical research. The Big Five are a descriptive model of per-sonality, not a theory.
Book value. The monetary amount by which an asset is valued in businessrecords, a ﬁgure not necessarily identical to the amount the asset couldbring on the open market.
Bubble. An economic bubble occurs when speculation in a commoditycauses the price to increase, thus producing more speculation. The priceof the good then reaches absurd levels and the bubble is usually followedby a sudden drop in prices, known as a crash.
Buffett, Warren. Born August 30, 1930; a wealthy American investor andbusinessman. As of publication, he was the second wealthiest person in theworld, worth over $45 billion.
Clemens, Samuel. Pen name “Mark Twain”; an American writer and hu-morist.
Comparator. The brain circuits used to compare expectations of goalprogress versus reality. Feelings arise as a result of the comparison.
Conﬁdence. Assurance, freedom from doubt, belief in one’s abilities.
Conscientiousness. Describes one’s tendency to plan and organize to-ward achieving goals, to follow rules while pursuing those goals, and tocontrol impulses along the way.
Cramer, James. Journalist, successful retired hedge fund manager,founder of TheStreet.com, and currently star of CNBC’s television showMad Money.
Crash (market). A sudden large decline of business or the prices ofstocks (especially one that causes additional failures).
Day trading. Buying and selling the same stock on the same day.
Decision making. The cognitive process of selecting a course of actionfrom among multiple alternatives.
Defense mechanism (a.k.a. emotional defense mechanism). Auto-matic psychological process that protects the individual against anxiety
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and from awareness of internal or external stressors or dangers. Defensemechanisms mediate the individual’s reaction to emotional conﬂicts andto external stressors. Some defense mechanisms (e.g., projection, splitting,and acting out) are almost invariably maladaptive.
Discounting (time). The preference for smaller immediate rewards overlarger, later rewards.
Dopamine. A neurotransmitter essential to the normal functioning of theanticipation and receipt of pleasure, learning, sequential thought, and mo-tor control.
Dorsolateral prefrontal cortex. Considered important for higher humanbrain functions such as working memory and conscious control of behav-ior. It is the last brain region to complete myelination, and it has been foundto still be organizing into the third decade of life.
Emotion. In psychology and common use, emotion is the language of aperson’s mental state of being, normally based in or tied to the person’sinternal (physical) and external (social) sensory feeling. Feelings such ashappiness, sadness, anger, elation, irritation, and joy are emotions.
Epinephrine (adrenaline). Both a neurotransmitter throughout the brainand a hormone released from the adrenal gland during stress, as a result ofactivation of the sympathetic nervous system.
Equity risk premium. The equity risk premium is the amount by whichstocks are expected to outperform bonds.
Equity premium puzzle. The phenomenon that observed returns onstocks over the past century are higher, by approximately 6 percent, thanreturns on government bonds. Economists expect arbitrage opportunitieswould reduce the difference in returns on these two investment opportu-nities to reﬂect the risk premium investors demand to invest in relativelymore risky stocks.
Excitement. Exhilaration; the feeling of lively and cheerful joy.
Expected value. In probability (and especially gambling), the expectedvalue (or expectation) of a random variable is the sum of the probability ofeach possible outcome of the experiment multiplied by its payoff (“value”).Thus, it represents the average amount one “expects” to win per bet if betswith identical odds are repeated many times.
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