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What Makes a Good Trader? On the Role of Reflection and Intuition on Trader Performance

Author

Listed:
  • Brice Corgnet

    (EM - EMLyon Business School, GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne - EM - EMLyon Business School - CNRS - Centre National de la Recherche Scientifique)

  • Mark Desantis

    (Chapman University)

  • David Porter

    (Chapman University)

Abstract

We utilize laboratory experiments to pinpoint three drivers of trader performance: fluid intelligence, cognitive reflection and theory of mind. Fluid intelligence provides traders with computational skills necessary to undertake statistical inference. Cognitive reflection helps traders avoid behavioral biases thereby allowing them to extract signals from market orders and update their prior beliefs accordingly. Theory of mind allows traders to assess the informational content of orders thus offering hints on the quality of those signals. We show cognitive reflection and theory of mind are complementary because traders benefit from understanding signals' quality only if they are capable of processing them.

Suggested Citation

  • Brice Corgnet & Mark Desantis & David Porter, 2018. "What Makes a Good Trader? On the Role of Reflection and Intuition on Trader Performance," Post-Print hal-02312062, HAL.
    • Handle: RePEc:hal:journl:hal-02312062
    DOI: 10.1111/jofi.12619
    as

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