Gazing through the bubble: an experimental investigation into financial risk-taking using eye-tracking

Abstract

Eye tracking can facilitate understanding irrational decision-making in contexts such as financial risk-taking. For this purpose, we develop an experimental framework in which participants trade a risky asset in a simulated bubble market to maximize individual returns while their eye movements are recorded. Returns are sensitive to eye movement dynamics, depending on the presented visual stimuli. Using eye-tracking data, we investigated the effects of arousal, attention, and disengagement on individual payoffs using linear and nonlinear approaches. By estimating a nonlinear model using attention as a threshold variable, our results suggest that arousal positively influences trading returns, but its effect becomes smaller when attention exceeds a certain threshold, whereas disengagement has a higher negative impact on reduced attention levels and becomes almost irrelevant when attention increases. Hence, we provide a neurobehavioral metric as a function of attention that predicts financial gains in boom-and-bust scenarios. This study serves as a proof-of-concept for developing future psychometric measures to enhance decision-making.

Role of behavioral biases in the investment decisions of Pakistan Stock Exchange investors: Moderating role of investment experience

“…Assets that have been acquired or inherited are also linked to endowment bias ( The findings are somewhat consistent with the loss aversion phenomenon (and shed additional light on its underlying mechanism). More importantly, these results support the current theory by suggesting that loss aversion may be more apparent when the investor values the information (related to investments) supplied to them more highly (Toma et al, 2023).…”

Responsible Innovations as Tools for the Management of Financial Risks to Projects of High-Tech Companies for Their Sustainable Development

“…As shown in Table 6, a new answer to the RQ was obtained. Unlike Martins (2023), Toma et al (2023), andVeselovsky et al (2018), we proved in this paper that responsible innovations do not raise but decrease financial risks because they increase the competitiveness of high-tech companies, simultaneously increasing their innovativeness and strengthening their business reputation as reliable suppliers, which is especially valuable in a high-risk market environment.…”

“…The performed overview and content analysis of existing publications revealed that they share a popular opinion that responsible innovations based on investment and innovative projects increase the financial risks posed to high-tech companies, for they do the following: raise the general uncertainty and risk (Martins 2023); raise the investment burden on companies with limited opportunities to return investments (Toma et al 2023); and require the flow of investments from more predictable innovative projects with larger opportunities to return investments (Veselovsky et al 2018). However, the given arguments are not sufficiently supported by scientific facts and require cross-checking, and the RQ remains open.…”

Attention biases the process of risky decision‐making: Evidence from eye‐tracking

“…The greater the level of attention given to a risky option, the higher the probability that that option will be chosen (He & Bhatia, 2023 ; Molter et al, 2022 ; Mueller et al, 2022 ; Sui et al, 2020 ; Toma et al, 2023 ; Wang & Liu, 2021 ). In particular, for risky choices, the choice results are expressed through risk preference, that is, whether people are more risk‐seeking or risk‐averse.…”