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Exploring the Nature of 'Trader Intuition'

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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)

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.

Suggested Citation

  • Antoine J. BRUGUIER & Steven R. QUARTZ & Peter BOSSAERTS, "undated". "Exploring the Nature of 'Trader Intuition'," Swiss Finance Institute Research Paper Series 10-02, Swiss Finance Institute.
  • Handle: RePEc:chf:rpseri:rp1002
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