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Published September 2019 | Published
Journal Article Open

Perception of intentionality in investor attitudes towards financial risks


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.

Additional Information

© 2018 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-ncnd/4.0/). Received 8 December 2017, Accepted 27 December 2017, Available online 11 January 2018. The authors thank Carsten Murawski for several discussions about philosophy of mind and its relation to economic and scientific thinking, which helped shape this review; Carsten Murawski and Christo Karunanathan for comments on an earlier draft; and participants during presentations at the 2015 Auckland Finance Meetings (New Zealand), the 2016 Conference on Experimental Finance at Chapman University, the 2016 Australasian Meetings of The Econometric Society, the 2016 Tucson Meetings of the Society for Experimental Finance, at the University of Geneva, the University of New South Wales and at Macquarie University.

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