Transferring cognitive talent across domains to reduce the disposition effect in investment

Autor: Kristian Rotaru, Petko S. Kalev, Nitin Yadav, Peter Bossaerts
Jazyk: angličtina
Rok vydání: 2021
Předmět:
Zdroj: Scientific Reports, Vol 11, Iss 1, Pp 1-9 (2021)
Druh dokumentu: article
ISSN: 2045-2322
DOI: 10.1038/s41598-021-02596-2
Popis: Abstract We consider Theory of Mind (ToM), the ability to correctly predict the intentions of others. To an important degree, good ToM function requires abstraction from one’s own particular circumstances. Here, we posit that such abstraction can be transferred successfully to other, non-social contexts. We consider the disposition effect, which is a pervasive cognitive bias whereby investors, including professionals, improperly take their personal trading history into account when deciding on investments. We design an intervention policy whereby we attempt to transfer good ToM function, subconsciously, to personal investment decisions. In a within-subject repeated-intervention laboratory experiment, we record how the disposition effect is reduced by a very significant 85%, but only for those with high scores on the social-cognitive dimension of ToM function. No such transfer is observed in subjects who score well only on the social-perceptual dimension of ToM function. Our findings open up a promising way to exploit cognitive talent in one domain in order to alleviate cognitive deficiencies elsewhere.
Databáze: Directory of Open Access Journals
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