Debiasing the Disposition Effect with Noninvasive Brain Stimulation: The Role of Cognitive Control

This study tests whether modulating a brain region associated with cognitive control using noninvasive brain stimulation affects the disposition effect. A participant trades stocks in an experimental asset market while their level of cognitive control is exogenously manipulated by applying weak current stimulation to a control-related cortical region. We find that the stimulation significantly affects the participant’s cognitive control and tendency to exhibit the disposition effect. This result is also obtained for financial professionals. We thus provide evidence that cognitive control is important for the disposition effect. This paper was accepted by Bruno Biais, finance. Funding: X. Niu acknowledges financial support from the National Natural Science Foundation of China [Grant 72203132], Taishan Scholar Program of Shandong Province [Grant tsqn201909013], and Natural Science Foundation of Shandong Province [Grant ZR2022QG048]. J. Li acknowledges financial support from the National Social Science Foundation of China [Grant 20AZD044], Natural Science Foundation of Shandong Province [Grant ZR2022MG068], and Project of Humanities and Social Sciences of Shandong University [Grant 21RWZD15]. Q. Cao acknowledges financial support from the Social Science Foundation of Jiangsu Province [Grant 21GLC006]. The authors also acknowledge financial support from the Major Project of the National Natural Science Foundation of China [Grant 72192842]. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2022.4596 .