Non-Conscious Emotions in Financial Decision-Making: A Neurobiological View of Asset Managers

Dragana Albert^*
*Correspondence: Dragana Albert, Department of Economics, Finance and Marketing, RMIT University, Melbourne, Australia, Email:

Introduction

Financial decision-making is often considered a rational and analytical process, driven by economic models and logical assessments of risk and return. However, research in neuroscience and behavioral finance suggests that emotions both conscious and non-conscious play a significant role in shaping investment decisions. Asset managers, who are responsible for making high-stakes financial choices, are influenced by deep-seated affective processes that operate below the level of conscious awareness. These non-conscious emotional responses, triggered by market trends, uncertainty, and past experiences, can subtly guide decision-making, leading to biases, risk-taking behavior, and investment patterns that deviate from purely rational models. The neurobiological mechanisms behind these processes involve brain structures such as the amygdala, which processes emotions and threats, and the prefrontal cortex, which regulates cognitive control and decision-making. This study explores the role of non-conscious affective processing in financial decision-making among asset managers, shedding light on how biological, psychological, and market-related factors interact to influence investment strategies [1].

Description

Non-conscious affective processing refers to emotional reactions and cognitive influences that occur outside an individualâ??s awareness but significantly impact their behavior. In the context of financial decision-making, asset managers operate in a fast-paced, high-pressure environment where they must process large amounts of data, predict market movements, and manage investment portfolios under conditions of uncertainty. While traditional finance theories assume that individuals act rationally and maximize utility, behavioral finance research suggests that cognitive biases and emotional responses often lead to deviations from optimal decision-making. Non-conscious emotional processes, shaped by neurobiological mechanisms, play a crucial role in influencing financial choices, even when investors believe they are acting rationally. One of the primary brain structures involved in non-conscious emotional processing is the amygdala, which detects threats and rewards in the environment. When asset managers face financial uncertainty or volatility, the amygdala rapidly assesses risk and triggers physiological responses such as increased heart rate, stress hormone release, and heightened alertness. These responses can lead to impulsive decision-making, such as overreacting to market downturns or becoming overly cautious in risk-averse conditions. Additionally, the insula, another brain region associated with processing emotions and bodily states, is activated when individuals experience financial losses [2]. Studies using Functional Magnetic Resonance Imaging (fMRI) have shown that loss aversion the tendency to weigh losses more heavily than equivalent gains is linked to heightened activity in the insula, leading asset managers to make conservative choices even when riskier investments might yield higher returns. The Prefrontal Cortex (PFC) plays a moderating role in financial decision-making by regulating emotions and implementing cognitive control. Experienced asset managers often develop stronger connections between the PFC and emotion-processing centers, allowing them to override impulsive reactions and make more strategic investment decisions. However, during periods of extreme market stress, such as financial crises or economic downturns, the balance between emotional and rational processing can become disrupted. Under high stress, the fight-or-flight response triggered by the amygdala may override logical reasoning, leading to panic selling, herd behavior, or excessive risk-taking. The influence of non-conscious affective processing becomes particularly evident in market bubbles and crashes, where collective emotional reactions drive asset prices away from fundamental values [3]. Another critical factor in non-conscious emotional processing is heuristics, or mental shortcuts that help individuals make quick decisions in complex environments. While heuristics can be useful in simplifying financial decision-making, they can also lead to systematic biases. For example, availability bias the tendency to rely on recent or emotionally charged experiences can cause asset managers to overestimate the probability of a market event based on recent news or extreme past occurrences. Similarly, confirmation bias leads investors to favor information that supports their pre-existing beliefs while ignoring contradictory data, reinforcing suboptimal investment strategies. These biases operate at a subconscious level, making them difficult to recognize and correct. The role of market sentiment and emotional contagion further amplifies the impact of non-conscious affective processing. Financial markets are not just driven by fundamental factors but also by collective investor emotions, which spread through social and professional networks. Asset managers are influenced by market mood, media narratives, and peer behavior, often without being fully aware of how these external cues shape their decision-making. The phenomenon of herd behavior, where investors follow the actions of others rather than independent analysis, is a direct result of unconscious emotional responses to social influence [4]. Studies have found that dopamine-driven reward processing reinforces herd mentality, making it difficult for asset managers to resist market trends even when their rational analysis suggests a different course of action. While non-conscious emotional processing can introduce biases and irrational behaviors, it also has adaptive advantages. Emotional intuition, shaped by years of experience in financial markets, allows skilled asset managers to quickly recognize patterns, anticipate market movements, and make intuitive decisions that may not be immediately explainable through formal analysis. Research in neuroeconomics suggests that expert investors develop an implicit sense of risk and opportunity, enabling them to make fast, accurate judgments in dynamic market conditions. The ability to balance rational analysis with well-calibrated emotional intuition distinguishes top-performing asset managers from those who struggle with decision-making under uncertainty [5].

Conclusion

The influence of non-conscious emotions in financial decision-making is a critical yet often overlooked factor in asset management. While traditional economic theories assume rational decision-making, insights from neuroscience and behavioral finance reveal that subconscious affective processes play a central role in shaping investment behavior. The interaction between brain structures such as the amygdala, insula, and prefrontal cortex determines how asset managers perceive risk, respond to market fluctuations, and navigate uncertainty. Emotional biases, heuristics, and market sentiment further contribute to investment decisions that may deviate from purely rational strategies. Understanding the neurobiological basis of financial decision-making can provide valuable insights for both individual investors and financial institutions. By recognizing the impact of non-conscious emotions, asset managers can implement strategies to reduce biases, enhance emotional regulation, and improve decision-making performance. Techniques such as mindfulness training, cognitive reframing, and algorithmic decision-support systems can help mitigate impulsive reactions and promote more data-driven investment strategies. Financial firms can also benefit from incorporating neuroscientific insights into risk management practices, ensuring that investment professionals are equipped to handle market volatility with greater emotional resilience.

Acknowledgement

None.

Conflict Of Interest

None.

References

1. Walla, Peter, Gerhard Brenner and Monika Koller. "Objective measures of emotion related to brand attitude: A new way to quantify emotion-related aspects relevant to marketing." PloS one 6 (2011): e26782.

Google Scholar Cross Ref  Indexed at

2. Rugg, Michael D., Ruth E. Mark, Peter Walla and Astrid M. Schloerscheidt, et al. "Dissociation of the neural correlates of implicit and explicit memory." Nature 392 (1998): 595-598.

Google Scholar Cross Ref  Indexed at

3. Roy, Mathieu, Jean-Philippe Mailhot, Nathalie Gosselin and Sébastien Paquette, et al. "Modulation of the startle reflex by pleasant and unpleasant music." Intal J Psychophysiol 71 (2009): 37-42.

Google Scholar Cross Ref  Indexed at

4. Anokhin, Andrey P. and Simon Golosheykin. "Startle modulation by affective faces." Biolog psychol 83 (2010): 37-40.

Google Scholar Cross Ref  Indexed at

5. Kofler, Markus, Mark Hallett, Gian Domenico Iannetti and Viviana Versace, et al. "The blink reflex and its modulation–Part 1: Physiological mechanisms." Clin Neurophysiol 160 (2024): 130-152.

Google Scholar Cross Ref  Indexed at