This is what a psychologist friend of mine predicted: if prices go stable, speculators will miss their dopamine releases and be even more upset than when price is plunging, which is at least exciting. Random, unpredictable, positive reinforcement is the best way to train behavior, and that has been the story of bitcoin for the past year or so.
The market has more to do with classical conditioning rather than with operant conditioning.
It is possible that every time we see a crash graph we laugh because the "goxed" meme pops up in our brain, or we might feel anguish because it reminds us about losing money.
The dopamine rush on the other hand, yes, she is right and I rely on it when I invest.
This is very similar to what compulsive gamblers do.
But it is improper to call it "random" reinforcements (that would have
NO effect at all), but
variable-ratio schedules.
This not only happens to humans, it happens with animals as well. In gamblers, the euphoria and the excitement is their "reward" (dopamin & endorphines). If winning at the casino were trivial, the gamblers would get really bored because there would be no excitement.
Btw, endorphines literally means "internal morphine", no wonder why it is so desirable and in some cases even addictive.
I take behavioral cues for investing, since I know how (crowd) psychology works I take that as an advantage when the prices are way under its value or from its
perceived value.
That's why neoclassical economics can't explain the irrational behavior of a gambler, because by definition economics is about "rational choices".
It is here where behavioral economics have its relevance when analyzing an inefficient market.
