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Perception of intentionality in investor attitudes towards financial risks

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  • Bossaerts, Peter
  • Suzuki, Shinsuke
  • O’Doherty, John P.

Abstract

Traditionally, financial market participation has been treated as analogous to playing games of chance with a physical device such as roulette. Here, we propose that humans treat financial markets as intentional agents, with own beliefs and aspirations. As a result, the capacity to infer the intentions of others, Theory of Mind, explains behaviour. As evidence, we appeal to results from recent studies of: (i) forecasting in the presence of insiders, (ii) trading in markets with bubbles, and (iii) financial contagion. Intensity of, and skill in, Theory of Mind explains heterogeneity, not only in choices but also in neural activation.

Suggested Citation

  • Bossaerts, Peter & Suzuki, Shinsuke & O’Doherty, John P., 2019. "Perception of intentionality in investor attitudes towards financial risks," Journal of Behavioral and Experimental Finance, Elsevier, vol. 23(C), pages 189-197.
    • Handle: RePEc:eee:beexfi:v:23:y:2019:i:c:p:189-197
    DOI: 10.1016/j.jbef.2017.12.011
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    Cited by:

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    2. Lambrecht, Marco & Sofianos, Andis & Xu, Yilong, 2020. "Does mining fuel bubbles? An experimental study on cryptocurrency markets," Working Papers 0690, University of Heidelberg, Department of Economics.
    3. Corgnet, Brice & DeSantis, Mark & Porter, David, 2021. "Information aggregation and the cognitive make-up of market participants," European Economic Review, Elsevier, vol. 133(C).
    4. Corgnet, Brice & Hernán-González, Roberto & Kujal, Praveen, 2020. "On booms that never bust: Ambiguity in experimental asset markets with bubbles," Journal of Economic Dynamics and Control, Elsevier, vol. 110(C).
    5. Brice Corgnet & Mark DeSantis & David Porter, 2020. "Information Aggregation and the Cognitive Make-up of Traders," Working Papers 20-18, Chapman University, Economic Science Institute.
    6. Bao, Te & Füllbrunn, Sascha & Pei, Jiaoying & Zong, Jichuan, 2024. "Reading the market? Expectation coordination and theory of mind," Journal of Economic Behavior & Organization, Elsevier, vol. 219(C), pages 510-527.

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