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Beware when a company has reported positive earnings surprises twice in a row. It is in the opposite of a sweet spot, and primed for a severe fall if it fails to keep up the trend.That finding, presented at the CFA Institute gathering here in Vancouver by financial writer Jason Zweig, emerges from research into the human brain and the way it processes information. Whether we like it or not, apparently, three is a trend.

There is a trend in the anterior cingulate cortex, which is apparently known to neuroscientists as the “oops circuit”. It tells us, with a speed of which we are not even conscious, that what we expected to happen did not happen. The human brain has more of this circuitry than any other species.

Further, we are conditioned to have a much greater response to a negative surprise than to a positive surprise. In the context of early humans on the East African savannah, this was necessary for survival. It was imperative that you took a negative surprise to heart and learned from it, or you would probably soon be eaten by predators.

Hence, at the most basic biological level, negative surprises hurt much more than positive surprises give pleasure. The ratio, observed in markets, is about three to one; negative earnings surprises do more damage than positive surprises do good.

When it comes to forming expectations, “two repetitions and your brain is done” says Zweig. Whether you realise it or not, once a stock has registered 10 per cent earnings gains twice in a row, you expect it to do so again.

Analysing “pain responses” in human subjects, the biggest jump in pain suffered comes at the moment when we believe that the second success is about to become the third. Thereafter the pain increases but not at so high a rate. The rise in disappointment when your expectation is let down at the eighth time of asking is less than half the increase in disappointment you feel when it happens on the third time.

The lesson from this: companies that have done well the last two quarters are primed for a big disappointment if they fail to meet the expectations. Contrary to intuition, the reaction will not necessarily be so much less than the response when a company that has beaten for many quarters in a row finally disappoints.

And the reason is that we cannot escape our biology. From the point of view of brain scans, Zweig says, our response to losing money looks exactly like our response to being chased by a lion.

Short View columnist John Authers is blogging for FT Alphaville from Vancouver at the annual gathering of the CFA Institute