However complex decisions about risk might be, it takes little to impact the outcome: Just show people pictures of erotic scenes or rotten food.

In a forthcoming study by Northwestern University assistant finance professor Camelia Kuhnen and a Stanford University colleague, associate psychology and neuroscience professor Brian Knutson, 28 research recruits were asked to make 90 decisions on asset allocation that ranged from safe to volatile - but not before they were flashed pictures to first stoke an emotional reaction.

It turns out people are more reluctant to make a risky investment after seeing an image of moldy peaches and more likely to go for risk after being aroused.

What this shows, say researchers, is that decisions about financial risk can be affected by emotional response. This research builds on the team's earlier findings and other studies showing some of the brain links that generate emotional states also process information about risk, and the results could go a long way toward helping behaviorists determine whether there's a genetic basis for risk appetite - and how that might translate to conscious action by financial advisors, traders or chief risk officers.

In universities and research labs throughout the world, researchers are examining the impact genetics, neurology, physics and biology might have on financial behavior. Overall, this germinal body of research - some of it bank-funded - could influence everything from risk management to pay incentives. (One study prompted the suggestion, cheekily or not, to send home traders in the morning if their testosterone levels aren't high enough.) It is also likely to be of interest to policymakers chiefly concerned with averting another financial crisis.

At the Karolinska Institute outside Stockholm, home to the Swedish Twin Registry, financial researchers have combed records twice in the last year seeking a genetic link for risk-taking. Claremont McKenna College economist Amir Barnea's team sliced and diced 40,000 pairs of twins' financial records, and the research has found that identical twins are more likely than nonidentical ones to make similar decisions for asset allocation, shares of equities and portfolio volatility.

These studies aren't about misallocated risk, or better or worse performance. The idea is broader. "If individuals who are more closely related genetically - i.e. identical twins - tend to be more similar on an analyzed trait such as asset allocation, this is evidence for that trait being heritable," the Barnea study says.

Growing statistical research suggests between 30 percent and 45 percent of financial behavior is passed from generation to generation (savers beget savers, and spenders yield new generations of spenders). While both teams' calculations back up findings that men generally take more risks than women, Barnea's study finds that the heritability of these behaviors has no gender preference, and never goes away with age.

If Barnea's study shows genetic patterns moving from generation to generation, Kuhnen is using a much finer genetic probe in her Chicago labs. Kuhnen and her colleagues suspect activity in certain brain regions, shot through with pathways carrying the neurotransmitters serotonin and dopamine, influence financial risk-taking behavior.

Her team's last published study recruited a group to make investment decisions based on risk. Participants then sent off DNA for genotyping. The results show that people who carry a short version of a gene regulating serotonin transmission are 28 percent more risk-averse than the average; on the other hand, people carrying a long allele for the gene regulating dopamine are 25 percent more likely to go for the risky investment than the average Joe.

The DNA tests are cheaper and easier to administer than other methods. These subjects got off with a light touch compared with the 2005 study establishing the serotonin and dopamine hypothesis. That one subjected 19 Northwestern doctoral students in finance, economics, accounting (the "experts") and the humanities (the "nonexperts") to making securities picks while in the tube of an MRI scanner.

The research of risk behavior is accumulating. Brian Roe at Ohio State University and his team are linking risk attitudes to nicotine receptor proteins in the body. Former trader and Cambridge neuroscientist John Coates is taking hormone tests to the trading floors, finding that a male trader's testosterone level predicts his day's profitability. Variance in these levels could shift risk preferences, he writes.

Researchers are taking other avenues to explain - or challenge - financial wisdom. Physicist and finance professor Doyne Farmer is working on new research about "heavy tails," or outsize and irrational nonlinear price fluctuations that are, perhaps, naturally caused by markets themselves.

At MIT's Laboratory for Financial Engineering, Andrew Lo monitored heart rates, pulses and sweaty palms of Boston traders, gauging emotional and physical responses to market fluctuations. He and his group are pursuing an "adaptive markets hypothesis," drawing on natural selection to derive an "evolving ecology" of market participants. He likes to invoke E.O. Wilson's findings on biodiversity in examining financial data. In a recent BBC interview he drew a picture of wolves and sheep: Wolves feed on sheep, sheep decrease; they decrease to a point where the hunter wolves themselves start to decrease, as sheep numbers rebound. "This is not an analogy. It is a clear illustration of how economic dynamics work."

Killer sharks swim into the picture. "If you take a shark and dump him on a sandy beach, the writhing and awkward movements of that shark would threaten no one. If you take a particular animal out of its natural adapted environment, it becomes extraordinarily inefficient in engaging in all sorts of activities," he says. "The same lesson can be learned for individual and institutional investors. We are not naturally designed to make good investment decisions."

Efforts to link hard science and finance go back a long way - at very least to Darwin's era. Late 19th-century robber barons took Herbert Spencer's writings such as "The Data of Ethics" to bring soothing natural law to the side of laissez-faire capitalism. Looking at current studies, sometimes one finds old conclusions wrapped up in new language. From Kuhnen: "Two emotional states, excitement and anxiety, influence our risk preferences." In other words, greed and fear. Lo's wolves and sheep offer a lesson on business cycles fueled by past decisions and actions and illustrate that it's better to hedge and diversify. The financial crash-and-burn these last two years brings with it much skepticism about the banking industry's ability to use - or misuse - quantitative tools in data-based strategic decisions. Bringing science to banking and markets could be another road to the same mistakes.

Finance is two steps forward, one back, Lo says. "We need to understand how basic principles apply to all different situations." For Wharton economist Richard Herring, bringing scientific method to finance is overdue. "We need better measures of diversification and a better way to motivate executives to act in the best interest of shareholders," he says. "It requires much deeper study than so far received."

Concrete recommendations could be coming. Lo suspects banks have to address the role that accounting plays in gauging risk exposure. "Accounting is ideal for decomposing the past. But it looks backward." Farmer's heavy-tail work might lead him to propose better-calibrated leverage caps. Kuhnen says pay needs to be delinked from short-term results in order to put a damper on emotional responses.

She finds an interesting comparison of markets to casinos, which give out free food and drinks, served by beautiful people, with the idea customers will gamble more. "But biological factors are just a part of the story," she says. "The crisis wasn't driven simply by behavioral biases of financial-market participants. It was in large part caused by poor incentives."

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