Can FinTech competition improve sell-side research quality?

We examine how increased competition stemming from an innovation in financial technology influences sell-side analyst research quality. We find that firms added to Estimize, an open platform that crowdsources short-term earnings forecasts, experience a pervasive and substantial reduction in consensus bias and a limited increase in consensus accuracy relative to matched control firms. Long-term forecasts and investment recommendations remain similarly biased, alleviating the concern that the documented reduction in bias is a response to broad economic forces. At the individual analyst level, we find that bias reduction is more pronounced among close-to-management analysts; and that more biased analysts respond by reducing their coverage of Estimize firms. The collective evidence suggests that competition from Estimize improves sell-side research quality by discouraging strategic bias.

Bias in the perceived prevalence of open defecation: evidence from Bihar, India

People often form perceptions about how prevalent a behavior is in a social group. However, these perceptions can be inaccurate and biased. While persistent undesirable practices in low-income countries have drawn global attention, evidence regarding people’s perception of how prevalent these practices are is scarce. Among those harmful practices, open defecation in India remains a significant public health concern, where it perpetuates the vicious cycle of disease and poverty. In this study, we focus on measuring the perceived prevalence of open defecation among respondents in Bihar, India. We examined the bias in perceived prevalence, which is defined as a pattern of deviation from the actual prevalence of open defecation. Results showed that respondents who defecate in the open overestimate the prevalence of open defecation, whereas those who consistently use toilets underestimate it. This finding suggests a false consensus bias in the perceived prevalence of open defecation. Scholars, policymakers, and program implementers who seek to correct misperceptions about open defecation by broadcasting real prevalence should be aware of biases in the perceived prevalence and address them in behavior change interventions.

Exploring the Africa-Asia Trade Nexus for Endangered Wildlife Used in Traditional Asian Medicine: Interviews With Traders in South Africa and Vietnam

Many species in Southeast Asia have been over-hunted to supply the demand for Traditional Asian Medicine (TAM) ingredients. As access to their parts become more difficult, consumer’s demand is shifting to novel substitutes. Accurate estimation of the level of illegal wildlife trade is therefore important to ensure long term sustainability. The primary aim of this study is to provide an understanding of the current illegal wildlife trade market for TAM purposes in South Africa. The secondary aim is to explore the possibility of applying different survey methods in detecting the trade in endangered wildlife parts. As the number of criminal’s wildlife of Vietnamese origin has increased in South Africa in recent decades, we surveyed 183 traditional medicine shops in both South Africa and Vietnam between April – August 2017, using direct observation and sensitive questioning techniques to estimate the magnitude of the wildlife trade for TAM purposes. Our results show that the Randomise Response Technique resulted in highest prevalence estimates for the trade in wild animal parts, while False Consensus Bias does not appear to be effective in this study. It is clear that wild animal parts are not only being trafficked from Africa to Asia for TAM use, but Asian originated products such as bear parts might also be smuggled into South Africa for domestic consumption. We recommend that improving wildlife law enforcement and providing protection for non-native species in domestic legislation in both South Africa and Vietnam is required to ensure the survival of these species.

Just a big misunderstanding? Bias and Bayesian affective polarization

I present a model of affective polarization---growth in hostility over time between two parties---via quasi-Bayesian inference. In the model, two agents repeatedly choose actions. Each choice is based on a balance of concerns for private interests and the social good. More weight is put on private interests when an agent's character is intrinsically more self-serving and when the other agent is believed to be more self-serving. Each agent Bayesian updates about the other's character, and dislikes the other more when she is perceived as more self-serving. I characterize the effects on growth in dislike of three biases: a prior bias against the other agent's character, the false consensus bias, and limited strategic thinking. Prior bias against the other's character remains constant or declines over time, and actions do not diverge. The other two biases cause actions to become more extreme over time and repeatedly be ``worse'' than expected, causing mutual growth in dislike, i.e., affective polarization. The magnitude of dislike can become arbitrarily large---even when both players are arbitrarily ``good'' (unselfish). The results imply that seemingly irrelevant cognitive biases can be an important cause of the devolution of relationships, in politics and beyond, and that subtlety and unawareness of bias can be key factors driving the degree of polarization.

Neural Correlates of the False Consensus Effect: Evidence for Motivated Projection and Regulatory Restraint

The false consensus effect (FCE), the tendency to project our attitudes and opinions on to others, is a pervasive bias in social reasoning with a range of ramifications for individuals and society. Research in social psychology has suggested that numerous factors (anchoring and adjustment, accessibility, motivated projection, etc.) may contribute to the FCE. In this study, we examine the neural correlates of the FCE and provide evidence that motivated projection plays a significant role. Activity in reward regions (ventromedial pFC and bilateral nucleus accumbens) during consensus estimation was positively associated with bias, whereas activity in right ventrolateral pFC (implicated in emotion regulation) was inversely associated with bias. Activity in reward and regulatory regions accounted for half of the total variation in consensus bias across participants (R2 = .503). This research complements models of the FCE in social psychology, providing a glimpse into the neural mechanisms underlying this important phenomenon.

Critical Thinking and Cognitive Bias

Teaching critical thinking skill is a central pedagogical aim in many courses. These skills, it is hoped, will be both portable (applicable in a wide range of contexts) and durable (not forgotten quickly). Yet, both of these virtues are challenged by pervasive and potent cognitive biases, such as motivated reasoning, false consensus bias and hindsight bias. In this paper, I argue that a focus on the development of metacognitive skill shows promise as a means to inculcate debiasing habits in students. Such habits will help students become more critical reasoners. I close with suggestions for implementing this strategy.