Why Your Brain is Killing Your Portfolio – WSJ.com

All the participants [in a study by researchers from California Institute of Technology, New York University and the University of Iowa] played a game in which they sampled four slot machines. They were free to play whichever machine they thought would give the biggest payoff. What they didn’t know was that the payoffs from each machine varied unpredictably.

The neuroscientists found that the two control groups tended to make their next bet based largely on how much a slot machine had paid off on the two most recent bets….

via Why Your Brain is Killing Your Portfolio – WSJ.com.