Journal article

Perception of intentionality in investor attitudes towards financial risks

Peter Bossaerts, Shinsuke Suzuki, John P O'Doherty

Journal of Behavioral and Experimental Finance | Elsevier | Published : 2019


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.