Exploring the Nature of 'Trader Intuition'

Antoine J. Bruguier, Steven R. Quartz and Peter Bossaerts
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Antoine J. Bruguier: California Institute of Technology
Steven R. Quartz: California Institute of Technology
Peter Bossaerts: California Institute of Technology, Swiss Federal Institute of Technology Lausanne and Swiss Finance Institute

No 10-02, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Experimental evidence has consistently confirmed the ability of uninformed traders, even novices, to infer information from the trading process. We hypothesized that ToM was involved after contrasting brain activation in subjects watching markets with and without insiders. ToM refers to the innate human capacity to discern malicious or benevolent intent. We find that skill in predicting price changes in markets with insiders correlates with scores on two ToM tests. We document GARCH-like persistence in transaction price change that may help with reading markets when there are insiders.

Pages: 120 pages
Date: 2010-01
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Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1002

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