Management Science

Available online 3 November 2022

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

Xiaofei Niu,  Jianbiao Li,  Dahui Li,  Qian Cao

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.