La Trobe
1188755_Rotaru,K_2021.pdf (2.17 MB)
Download file

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

Download (2.17 MB)
journal contribution
posted on 09.02.2022, 00:48 authored by K Rotaru, Petko KalevPetko Kalev, N Yadav, P Bossaerts
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.

History

Publication Date

29/11/2021

Journal

Scientific Reports

Volume

11

Article Number

23068

Pagination

9p.

Publisher

Springer Nature Limited

ISSN

2045-2322

Rights Statement

© The Author(s) 2021 This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.

Usage metrics

Categories

Licence

Exports