Some time back, I'd written about a company that supposedly trains rats to trade on the financial markets. This outfit, called Rat Traders, had an elaborate website, complete with 'training' videos, charts of different trader's track records and a lot else. Despite all that, it was clearly a joke. However, what is not a joke is the actual use of animals by researchers in behavioural finance.
There have been a large number of studies of economic reasoning in animals. The underlying logic seems to be that if an economic behaviour pattern is there in an animal, then it must in some sense be a fundamental trait of animals' brain in general. Therefore, it is supposed to help understand similar behaviour in humans.
While this is similar to animal models that are used for medical and other research, one would have thought that economic behavior is something different, but apparently not. In one set of experiments at Yale University, researchers have apparently succeeded in creating a currency system in a group of monkeys and have observed a range of human-like trading behaviours. These monkeys have been trained to use 'coins' and they can get food, they have to purchase it with the money.
Researchers created a situation where monkeys would have to gamble if they wanted a larger amount of food and found that they wanted certainty, and were averse to taking risks. Most interestingly, they also discovered that the monkeys were attracted to discounts! When the price of a certain item was decreased, the monkeys bought more of it even if they didn't need it and later wasted it. How is this relevant to understanding human behavior? I think it shows that certain economic behaviour patterns are the result of some innate instincts that have evolved and it will take more than rational reasoning to overcome them.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
