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Exploring the Nature of 'Trader Intuition'Antoine Jean BruguierCalifornia Institute of Technology Steven R. QuartzCalifornia Institute of Technology Peter BossaertsCalifornia Institute of Technology; Swiss Finance Institute; Ecole Polytechnique Fédérale de Lausanne January 1, 2010 Journal of Finance, Forthcoming Swiss Finance Institute Research Paper No. 10-02 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 changes that may help with reading markets when there are insiders.
Number of Pages in PDF File: 102 Accepted Paper SeriesDate posted: January 2, 2010 ; Last revised: January 17, 2010Suggested CitationContact Information
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