Risky business
Submitted by jonevans on 13 November 2013 - 5:02pm
NIR spectroscopy has already proved its worth as a powerful and flexible analytical technique in many applications, but it now appears its talents could even extend to helping ward off a future financial crisis. For a team of researchers at the University of Zurich in Switzerland led by Philippe Tobler has shown that it can be used to monitor risk taking in financial decisions.
Tobler had already studied financial risk taking using functional magnetic resonance imaging (fMRI). This revealed that risk-seeking people experience an increase in activity in a part of the brain called the lateral prefrontal cortex, which is known to be involved in decision making, when offered a risky financial proposition. In contrast, risk-averse people experience a decrease in activity in the same brain region when offered a risky proposition.
Next, Tobler wanted to see whether he could replicate this result with NIR spectroscopy, which like fMRI can determine brain activity based on blood flow but is much simpler, cheaper and more portable. He and his team attached an NIR headband to 20 volunteers, who were then repeatedly offered a choice between definitely receiving a certain amount of money, either 30 or 60 Swiss Francs (CHF; around £20 or £40), or a 50:50 chance of receiving an amount of money that was either lower or higher than the definite amount.
So if the definite amount was CHF 30, the higher and lower amounts were CHF 15 and 45 in the low-risk option and CHF 10 and 50 in the high-risk option. Each volunteer did this 40 times, and then one trial was chosen at random and they were given the amount of money they would have received for this trial, with the higher or lower amounts decided by a coin toss.
As they report in NeuroImage, NIR spectroscopy detected exactly the same activity difference between the risk-seeking and risk-averse volunteers when offered the low-risk and high-risk options as revealed by fMRI. Just to be on the safe side, perhaps we should already start handing out NIR headsets to bankers.
