The Impact of fear on the stock exchange gamblers' behaviour

• Author: Suciu T.
• Pages: 311-318

Bulletin of the Transilvania University of Braşov

Series V: Economic Sciences • Vol. 8 (57) No. 2 - 2015

The Impact of fear on the stock exchange gamblers’

behaviour

Titus SUCIU1

Abstract: The paper creates a link between the five basic fears in humans and their

occurrence when we invest in the stock exchange. The author identifies five basic fears in

humans: fear of being rejected, abandoned, humiliated, betrayed and the victim of an

injustice. The stock market investor is confronted with the following fears: the disposition

effect, the hedonistic approach, the effect of the committed expenditure, the snake bite effect,

the dismissal of any regret (or the no regret approach), the status quo prejudice and the

endowment effect. The author shows that the stock investor’s seven fears are specific cases of

the five basic fears. The first step in confronting these fears is to become aware of the mask

worn.

Key-words: fear, behaviour, investor, stock exchange, financial market

1. Introduction

If the fear of the unknown prevents most people from bearing risks, so does the fear

of failure. Any activity in which there is a likelihood of failure is risky. Just as fear

of uncertainty and fear of failure goes through in the brain, distorting perception and

inhibiting action. Where a loss is signalled, fear will be triggered. Each decision

taking requires weighing strengths and weaknesses. Some focus almost only on

positive results, while others concentrate on the negative ones.

By analysing the answers given by the brains of various persons, researchers

have identified a neural fingerprint making the difference between the cold–blooded

and the cold feet. A part of the brain associated with processing physical stimuli, the

secondary somatosensory cortex had an increase in activity with the very fearful

when they were informed on the waiting time. Hyperactivity in this network of brain

areas can trigger the impulsive and irrational behaviour, at least when it comes to the

fear of something unpleasant.

Lo and Repin analysed reactions of investors to instable events (price

deviations, price trend reversals and price volatility). They rated businesspeople into

1 Transilvania University of Braşov, titus.suciu@unitbv.ro