AgPa #8: Neuroscientific Insights for Alpha
Harnessing Neuroscientific Insights to Generate Alpha (2022)
Elise Payzan-LeNestour, James Doran, Lionnel Pradier, Tālis J. Putniņš
Financial Analysts Journal, 78(2), 79-95, URL
We are all prone to psychological biases that are very hard to control. This week’s AGNOSTIC Paper examines the after-effect, one particular example for this.
The idea of the after-effect is simple. If you are long enough exposed to a certain stimuli, you will have the illusion of the exact opposite stimuli after the first one disappears. Apparently, this pattern was very relevant for the US stock market…
- The after-effect distorted the VIX Index
- Exploiting the after-effect yielded significant alpha