The Instinctive Mind on Wall Street

This article aims to stimulate inquiry into the role that human evolution plays in the investment decision process. Using insights from the field of evolutionary psychology, the author presents evidence that suggests that herding, overconfidence, loss aversion, and heavy reliance on concrete, personal, and affective information may have evolutionary roots. The investment implications of these behaviors include security price overrreaction, excessive stock trading, higher-than-expected risk premiums, and greater stock price sensitivity to concrete and imaginable events.