Dynamic portfolio choice with uncertain rare-events risk in stock and cryptocurrency markets.

In response to the unprecedented uncertain rare events of the last decade, we derive an optimal portfolio choice problem in a semi-closed form by integrating price diffusion ambiguity, volatility diffusion ambiguity, and jump ambiguity occurring in the traditional stock market and the cryptocurrency market into a single framework. We reach the following conclusions in both markets: first, price diffusion and jump ambiguity mainly determine detection-error probability; second, optimal choice is more significantly affected by price diffusion ambiguity than by jump ambiguity, and trivially affected by volatility diffusion ambiguity. In addition, investors tend to be more aggressive in a stable market than in a volatile one. Next, given a larger volatility jump size, investors tend to increase their portfolio during downward price jumps and decrease it during upward price jumps. Finally, the welfare loss caused by price diffusion ambiguity is more pronounced than that caused by jump ambiguity in an incomplete market. These findings enrich the extant literature on effects of ambiguity on the traditional stock market and the evolving cryptocurrency market. The results have implications for both investors and regulators.

Decreased brain connectivity in smoking contrasts with increased connectivity in drinking.

In a group of 831 participants from the general population in the Human Connectome Project, smokers exhibited low overall functional connectivity, and more specifically of the lateral orbitofrontal cortex which is associated with non-reward mechanisms, the adjacent inferior frontal gyrus, and the precuneus. Participants who drank a high amount had overall increases in resting state functional connectivity, and specific increases in reward-related systems including the medial orbitofrontal cortex and the cingulate cortex. Increased impulsivity was found in smokers, associated with decreased functional connectivity of the non-reward-related lateral orbitofrontal cortex; and increased impulsivity was found in high amount drinkers, associated with increased functional connectivity of the reward-related medial orbitofrontal cortex. The main findings were cross-validated in an independent longitudinal dataset with 1176 participants, IMAGEN. Further, the functional connectivities in 14-year-old non-smokers (and also in female low-drinkers) were related to who would smoke or drink at age 19. An implication is that these differences in brain functional connectivities play a role in smoking and drinking, together with other factors.

Functional Connectivity of the Anterior Cingulate Cortex in Depression and in Health.

The first voxel-level resting-state functional connectivity (FC) neuroimaging analysis of depression of the anterior cingulate cortex (ACC) showed in 282 patients with major depressive disorder compared with 254 controls, some higher, and some lower FCs. However, in 125 unmedicated patients, primarily increases of FC were found: of the subcallosal anterior cingulate with the lateral orbitofrontal cortex, of the pregenual/supracallosal anterior cingulate with the medial orbitofrontal cortex, and of parts of the anterior cingulate with the inferior frontal gyrus, superior parietal lobule, and with early cortical visual areas. In the 157 medicated patients, these and other FCs were lower than in the unmedicated group. Parcellation was performed based on the FC of individual ACC voxels in healthy controls. A pregenual subdivision had high FC with medial orbitofrontal cortex areas, and a supracallosal subdivision had high FC with lateral orbitofrontal cortex and inferior frontal gyrus. The high FC in depression between the lateral orbitofrontal cortex and the subcallosal parts of the ACC provides a mechanism for more non-reward information transmission to the ACC, contributing to depression. The high FC between the medial orbitofrontal cortex and supracallosal ACC in depression may also contribute to depressive symptoms.