TY - JOUR
T1 - Transferring cognitive talent across domains to reduce the disposition effect in investment
AU - Rotaru, Kristian
AU - Kalev, Petko S.
AU - Yadav, Nitin
AU - Bossaerts, Peter
N1 - Funding Information:
The authors wish to thank Arno Riedl, Guillaume Frechette, Elise Payzan-LeNestour, Jake Rose, participants at the 2018 Behavioural Insights (BX2018) Conference, and in particular Cass Sunstein, participants at the 9th Miami Behavioral Finance conference, and in particular the discussant Francesco D’Acunto, participants at the 8th Behavioural Finance and Capital Markets conference (Best Paper Award), and in particular the discussants Barry Oliver and Simon Russell, participants at the 2018 SEF Experimental Finance Conference, and 2018 SEF regional Asia-Pacific Meeting for their comments. The authors also thank the Monash Business School and the Australian Research Council (ARC LIEF grant LE130100112) for funds associated with the Monash Business Behavioural Laboratory equipment used in this study, the Commonwealth Bank of Australia for sponsoring the Rising Star Award for Financial Wellbeing presented to Kristian Rotaru for this research project at BX2018, and the University of Melbourne for funding through the R@MAP Chair of Peter Bossaerts.
Publisher Copyright:
© 2021, The Author(s).
PY - 2021/12
Y1 - 2021/12
N2 - 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.
AB - 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.
UR - http://www.scopus.com/inward/record.url?scp=85120081426&partnerID=8YFLogxK
U2 - 10.1038/s41598-021-02596-2
DO - 10.1038/s41598-021-02596-2
M3 - Article
C2 - 34845327
AN - SCOPUS:85120081426
SN - 2045-2322
VL - 11
JO - Scientific Reports
JF - Scientific Reports
IS - 1
M1 - 23068
ER -