Proposal of extended Lollapalooza effect for behavioral finance : are dopamin receptors a good candidate in genoeconomics?

Abstract

PURPOSE: Since it was discovered that the main cause of market anomalies, which traditional theories are insufficient to explain, is human behavior, the eyes turned to behavioral theories have now started to search for the causes of these behavioral errors in very different disciplines. This search, which seems justified when it comes to human behavior, has pushed researchers to interdisciplinary studies and these studies have added new concepts to the literature. The Lollapalooza effect is one of these concepts. This concept, put forward by Charles Munger, can be expressed as the cause of behavioral anomalies, which are caused by the coexistence of more than one prejudice affecting human behavior, that turns the brain into mush. The aim of this study is to examine the behavioral biases of the Lollapalooza effect, as well as to demonstrate the inclusion of genetic factors for an extended Lollapalooza effect.

FINDINGS: Looking at the results of the study, it is revealed that genetic information may be one of the reasons for economic and financial decisions. In addition, although there are many studies in the literature in which cognitive errors, which occur with the effect of psychological and sociological factors, are discussed individually and their causes and results are discussed in detail, it has been revealed that the causes and consequences of considering all of them together should be investigated.

IMPORTANCE OF THE STUDY: Since dopamine receptor genes are known to be closely related to human behavior, it is clear that these genes can expand the limits of lollapalooza effect in financial decisions. In this way, it is revealed that the causes and consequences of investor behavior should be addressed not only psychologically, but also genetically and even neurologically.