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Author Notes:

Correspondence: Gregory S. Berns, 1602 Fishburne Drive, Atlanta, GA 30322; Tel: 404-727-2556; Email: gberns@emory.edu

Acknowledgments: We thank C. N. Noussair for experimental design input and manuscript feedback and S. E. Moore for help with programming the experiment.


Research Funding:

Funding was provided by a grant from the National Institute on Drug Abuse (DA024045) through the American Recovery and Reinvestment Act (ARRA).


  • fmri
  • neuroeconomics
  • decision making

Neural Insensitivity to Upticks in Value is Associated with the Disposition Effect


Journal Title:



Volume 59, Number 4


, Pages 4086-4093

Type of Work:

Article | Post-print: After Peer Review


The disposition effect is a phenomenon in which investors hold onto losing assets longer than they hold onto gaining assets. In this study, we used functional magnetic resonance imaging (fMRI) to measure the response of valuation regions in the brain during the decision to keep or to sell an asset that followed a random walk in price. The most common explanation for the disposition effect is preference-based: namely, that people are risk-averse over gains and risk-seeking over losses. This explanation would predict correlations between individuals’ risk-preferences, the magnitude of their disposition effect, and activation in valuation structures of the brain. We did not observe these correlations. Nor did we find evidence for a realization utility explanation, which would predict differential responses in valuation regions during the decision to sell versus keep an asset that correlated with the magnitude of the disposition effect. Instead, we found an attenuated ventral striatum response to upticks in value below the purchase price in some individuals with a large disposition effect. Given the role of the striatum in signaling prediction error, the blunted striatal response is consistent with the expectation that an asset will rise when it is below the purchase price, thus spurring loss-holding behavior. This suggests that for some individuals, the disposition effect is likely driven by a belief that the asset will eventually return to the purchase price, also known as mean reversion.

Copyright information:

© 2011 Elsevier Inc. All rights reserved.

This is an Open Access work distributed under the terms of the Creative Commons Attribution-NonCommerical-NoDerivs 3.0 Unported License (http://creativecommons.org/licenses/by-nc-nd/3.0/).

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