Buying into Neurodiversity: Individuals with Lower Social Responsiveness are Less Susceptible to Buying into a Bubble Market

Abstract

Some individuals are more susceptible to overvaluing assets in bubble markets than others. However, the degree to which an individual’s social environment and social cognition affect bubble susceptibility is unclear. We examined the effects of social aptitude and social context on individual investors’ performance in experimental markets. Here we report that participants with lower social aptitude were less susceptible to bubbles in a social financial market. Participants with higher social responsiveness were more likely to buy a stock after seeing another participant buy a stock, and were also more likely to buy in a bubble market compared to a non-bubble market. Our findings suggest that bubbles are perpetuated by the herding behavior of highly social individuals, highlighting the importance of neurodiversity among asset traders.

Keywords: decision-making, social cognition, bubble markets, neurodiversity, behavior

JEL Classification: G02, G11, M31, G01