Using Experimental and Neurological Data to Gain a Deeper Understanding of Realization Utility Theory

Abstract

Starting with the premise that realization utility theory helps explain trading behavior, this study combines a carefully crafted experimental design with functional magnetic resonance imaging technology to offer a more inclusive examination of factors that affect REIT trading behavior beyond whether a REIT is simply trading up or down. We add to the nascent field of neurological real estate by finding that local gains/loss domains are more relevant than are global gain/loss considerations, financial skewness is a significant determinant of trading behavior, and that performance inside the REIT market influences how hard subjects think when performing tasks outside the market.

Modeling Risk-Taking from Different Measurement Instruments

“…This index measures the return rate of each choice. The higher and more positive the downside risk index is, the higher the return rate of the choice and thus the lower the risk-taking (Gibson, Seiler, & Walden, 2016). The reliability was estimated by frequency of risk-taking or risk-aversion choice in each trial, KR-20 was .54.…”