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Debiasing the Disposition Effect with Noninvasive Brain Stimulation: The Role of Cognitive Control

Author

Listed:
  • Xiaofei Niu

    (School of Economics/Institute for Study of Brain-like Economics, Shandong University, Jinan 250100, China)

  • Jianbiao Li

    (School of Economics/Institute for Study of Brain-like Economics, Shandong University, Jinan 250100, China)

  • Dahui Li

    (Labovitz School of Business and Economics, University of Minnesota Duluth, Duluth, Minnesota 55812)

  • Qian Cao

    (School of Business Administration, Nanjing University of Finance & Economics, Nanjing 210023, China)

Abstract

This study tests whether modulating a brain region associated with cognitive control using noninvasive brain stimulation affects the disposition effect. A participant trades stocks in an experimental asset market while their level of cognitive control is exogenously manipulated by applying weak current stimulation to a control-related cortical region. We find that the stimulation significantly affects the participant’s cognitive control and tendency to exhibit the disposition effect. This result is also obtained for financial professionals. We thus provide evidence that cognitive control is important for the disposition effect.

Suggested Citation

  • Xiaofei Niu & Jianbiao Li & Dahui Li & Qian Cao, 2023. "Debiasing the Disposition Effect with Noninvasive Brain Stimulation: The Role of Cognitive Control," Management Science, INFORMS, vol. 69(10), pages 6293-6312, October.
    • Handle: RePEc:inm:ormnsc:v:69:y:2023:i:10:p:6293-6312
    DOI: 10.1287/mnsc.2022.4596
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    References listed on IDEAS

    as
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    Cited by:

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    3. Li, Jianbiao & Liu, Zenghui & Niu, Xiaofei, 2025. "Transcranial stimulation over the right temporoparietal junction decreases outcome bias," Journal of Economic Psychology, Elsevier, vol. 111(C).
    4. Liu, Jie & Zhang, Jingru & Chen, Zhenshan, 2025. "The effect of stock market manipulation on investor behavioral bias," Journal of Behavioral and Experimental Finance, Elsevier, vol. 47(C).

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