UCL Press Release: 'Emotional inflation' leads to stock market meltdown
30 April 2008
Investors get carried away with excitement and wishful 'phantasies' as the stock market soars, suppressing negative emotions which would otherwise warn them of the high risk of what they are doing, according to a new study led by UCL.
Economic models fail to factor in the emotions and unconscious mental life that drive human behaviour in conditions where the future is uncertain says the study, which argues that banks and financial institutions should be as wary of 'emotional inflation' as they are fiscal inflation.
Read the full press release.