Transferring cognitive talent across domains to reduce the disposition effect in investment

We consider Theory of Mind (ToM), the ability to correctly predict the intentions of others. To an important degree, good ToM function requires abstraction from one’s own particular circumstances. Here, we posit that such abstraction can be transferred successfully to other, non-social contexts. We consider the disposition effect, which is a pervasive cognitive bias whereby investors, including professionals, improperly take their personal trading history into account when deciding on investments. We design an intervention policy whereby we attempt to transfer good ToM function, subconsciously, to personal investment decisions. In a within-subject repeated-intervention laboratory experiment, we record how the disposition effect is reduced by a very significant 85%, but only for those with high scores on the social-cognitive dimension of ToM function. No such transfer is observed in subjects who score well only on the social-perceptual dimension of ToM function. Our findings open up a promising way to exploit cognitive talent in one domain in order to alleviate cognitive deficiencies elsewhere.

HOW FEMALE DIFFER IN DECISION MAKING FOR PERSONAL INVESTMENT STRATEGY

This study investigates Lithuanian females’ personal investment peculiarities in line with Australia’s case analysis and application as a good practice method. Based on many publicly available research females tend to have less knowledge about finances in general and particularly investment processes; hence, it leads to their lack of interest into investing and the possibility of poor money management. This issue might be solved by investigating why it appears first and adopting the practical example from countries with developed investment market. In the case of comparison of personal investment strategies among Lithuanian and Australian females the two sets of questionnaires have been used to collect the data for further analysis. The main findings revealed by the survey were, that women in Australia had a higher financial literacy level, invested more often, and chose broader variety of investment instruments compared to Lithuanian females. Moreover, the significant discovery of the article disclosed that Lithuanian females chose not to invest due to the lack of additional funds and the shortage of financial knowledge. The main limitation occurred during the research was the lack of the available data on personal investment topic in Lithuania’s official statistic sources such as The Lithuanian Department of Statistics. The results of the research contribute towards improving Lithuanian female personal finance and investment areas and could be applied to further studies or used for the education program dedicated to financial literacy among women in Lithuania creation. Furthermore, this article creates an original value to personal finance, investment, and financial literacy areas in Lithuania by introducing an idea to not only conduct more studies in these fields, but also to use comparative analysis and good practice method from the countries that demonstrates high achievements in personal finance and gender equality areas. Keywords: personal investment management, female investment, financial literacy, investor’s profile, investing, investment options, investment strategies. JEL Classification G51, G53 Formulas: 1; fig.: 5; tabl.: 1; bibl.: 15

Understanding “Riba” (interest): the religious and the rational

Learning outcomes The case explores Ayesha’s reasoning, who is also a financial expert, regarding how she approaches the question of Riba (interest) so that she can maximize her financial returns and remain true to her religious identity. The discussion in the case revolves around alternate rationalizations as to why Riba (interest) continues to remain important for many Islamic investors. Case overview/synopsis Historically, the prohibition of Riba (interest) prevented the exploitation of the poor borrower who was charged exorbitant interest rates by wealthy lenders. In the modern day, a banking system which operates in a regulated setup and charges market-based interest rates, the rationale regarding the exploitation of the poor seems less compelling. Furthermore, other economic realities such as inflation and currency fluctuations further lend support to protecting one’s investments through prudent financial decisions. In this case the authors approach this decision regarding the prohibition of Riba (interest) in Islam from the point of view of the protagonist, Ayesha Bhatti, who is religiously conscious and is faced with certain personal investment choices. Complexity academic level The case focuses on one of the core issues of Islamic finance (IF), that of the prohibition of charging Riba (interest) on debt and the reasons behind this ruling. The relevance of this prohibition to modern day financial markets is essential to understand IF. Supplementary materials Teaching notes are available for educators only. Subject code CSS 1: Accounting and Finance.

Transferring Cognitive Talent Across Domains: The Case of Finance

We consider Theory of Mind, the ability to correctly predict the intentions of others. The skill requires abstraction from one’s own particular circumstances. Here, we posit that such abstraction can be transferred successfully to other, non-social contexts. We consider the disposition effect, which is a pervasive cognitive bias whereby investors, including professionals, improperly take their personal trading history into account when deciding on investments. We design an intervention policy whereby we attempt to transfer Theory of Mind skills, subconsciously, to personal investment decisions. In a within-subject repeated-intervention laboratory experiment, we record how the disposition effect is reduced by a very significant 85%, but only for those with high Theory of Mind skills. No such transfer is observed in subjects who score well only on the emotional dimension of interpersonal skills. Our findings open up a promising way to exploit cognitive talents in one domain in order to alleviate cognitive deficiencies elsewhere.

The Effect of Financial Literacy on Personal Investment Decisions amongst Medical Practitioners in Sri Lanka

Financial literacy is very essential for any individual in order to efficient and effective decisions regarding their personal investments. Based on that scenario, this study examines the impact of financial literacy on personal investment decisions amongst medical practitioners in Sri Lanka. Personal investment decision has been considered as the dependent variable while financial knowledge, financial skills and financial attitude has been considered as the proxies for the independent variable. Deductive approach has been employed using primary data which is obtained from 205 respondents throughout the country. Descriptive and inferential statistics such as multiple linear regression have been used for the analysis purpose. The results suggested that there is a significant impact between the financial knowledge and financial skills on investment decision while the financial attitude does not have a significant impact on the investment decision. The empirical findings of this study are helpful for any individual who is willing to take effective investment decisions, academics, policy makers and all other related interested parties.

Transferring Cognitive Talent Across Domains: The Case of Finance

We consider Theory of Mind, the ability to correctly predict the intentions of others. The skill requires abstraction from one’s own particular circumstances. Here, we posit that such abstraction can be transferred successfully to other, non-social contexts. We consider the disposition effect, which is a pervasive cognitive bias whereby investors, including professionals, improperly take their personal trading history into account when deciding on investments. We design an intervention policy whereby we attempt to transfer Theory of Mind skills, subconsciously, to personal investment decisions. In a within-subject repeated-intervention laboratory experiment, we record how the disposition effect is reduced by a very significant 85%, but only for those with high Theory of Mind skills. No such transfer is observed in subjects who score well only on the emotional dimension of interpersonal skills. Our findings open up a promising way to exploit cognitive talents in one domain in order to alleviate cognitive deficiencies elsewhere.

Gender Impact on Personal Investment Strategies

Research purpose. This study is dedicated to investigating the peculiarities of personal investment decisions among female and male investors to analyse the gender differences that occur during personal investment strategy establishment processes. This study is based on the literature research and aims at exploring the existing knowledge on financial behaviour and gender influence on personal investment selection. The importance and originality of this study are that it assesses the collective evidence in the personal investment field and explores its processes through the prism of gender impact. The understanding of the gender bias impact on the personal investment strategy development process can play an important role in addressing the issue of gender inequality in finance and investment areas. This paper is dedicated to answering the question of how gender impacts personal investment strategies. Design/ Methodology/ Approach. The major task was to conduct the research on the male and female personal investment decision peculiarities presented in literature sources and to prepare the survey to conduct practical research while applying theoretical knowledge and presenting the findings along with the suggestions on how to improve the female situation in investment field. Findings. The most prominent finding to emerge from this study is that females lack knowledge and understanding in finance and especially investment areas; therefore, this leads to inadequacy in self-confidence in finance and investment matters and, as a result, neglect of successful personal finance management and, more significantly, poor investment strategy decisions. Originality/ Value/ Practical implications. The main goal of the current study was to determine whether the gender difference exists in personal finance and especially investment area, to refine the reasons behind this phenomenon, to analyse what could be done to improve the situation and introduce suggestions for further research. The research was done based on relevant literature, reports, surveys, statistical data used for literature analysis, and Lithuania’s case study for the practical part of the research. The primary objectives were to find out what are the main peculiarities between males and females when it comes to personal investment strategy choices and to analyse financial literacy and investment fields through the female perspective. The main points revealed during this study were that men tend to invest more often than women, as females, in general, prefer to save rather than invest; women tend to choose less risky investment strategies compared to men or save rather than invest. The main factors of this phenomena are the influence of cultural, social, or psychological factors, low financial literacy level, differences in economic status, longer life expectancy, the lack of confidence when it comes to knowledge applied to the financial decisions; males are more likely to choose a higher-risk investment strategy and to be more confident in their investment ability even if they have less knowledge on the matter. The analysis of Lithuania’s case has also confirmed the main literature review findings and reported females to lack financial and investment knowledge, spare funds and prefer to save rather than invest or invest into the low-risk tools.

Label information and consumer behaviour: evidence on drinking milk sector

The purpose of the research is to evaluate the impact of different kinds of information disclosures of milk labels, investigating the interest among consumers based on their consumption behaviours and characteristics. In this research, all the actions which lead to a healthiness, become expressions of a production process, among which consumers’ food choices, purchase, preparation, and also self-production. Therefore, in the “health creation” production process, information and knowledge about food become “investments”. In this context, label disclosures become a tangible expression of this kind of “investment”. The research question is: what impact do purchase preferences and consumers’ characteristics have on their interest towards the label information provided? Several information disclosures, both mandatory and voluntary, are investigated. Therefore, some choice attributes will be analysed as indicators of the consumer’s behaviour in relation to his investment in food information. The methodology used for the analysis is an Ordered Logit. The analysis of the consumer’s behaviour has been performed by transposing Ménard’s analysis of firm corporate governance (Ménard, Agribus. 34:142–160, 2018) to the consumer as producer of welfare equity. The reduction of information asymmetry is a cost for the producer, and this research may be able to measure how much it would be convenient to invest in this reduction, based on the analysis of the consumer’s behaviour toward his personal investment in food information acquisition.

Self-Correction in Psychological Science: How do Psychologists Update their Beliefs in Response to Replications?

Self-correction—a key feature distinguishing science from pseudoscience—requires that scientists update their beliefs in light of new evidence. However, people are often reluctant to change their beliefs. We examined self-correction in action, tracking research psychologists’ beliefs in psychological effects before and after the completion of four large-scale replication projects. We found that psychologists did update their beliefs; they updated as much as they predicted they would, but not as much as our Bayesian model suggests they should if they trust the results. We found no evidence that psychologists became more critical of replications when it would have preserved their pre-existing beliefs. We also found no evidence that personal investment or lack of expertise discouraged belief updating, but people higher on intellectual humility updated their beliefs slightly more. Overall, our results suggest that replication studies can contribute to self-correction within psychology, but psychologists may underweight their evidentiary value.