The illogicality of stock-brokers: psychological experiments on the effects of prior knowledge and belief biases on logical reasoning in stock trading.

<h4>Background</h4>Explanations for the current worldwide financial crisis are primarily provided by economists and politicians. However, in the present work we focus on the psychological-cognitive factors that most likely affect the thinking of people on the economic stage and thus migh...

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Autores principales:	Markus Knauff, Claudia Budeck, Ann G Wolf, Kai Hamburger
Formato:	article
Lenguaje:	EN
Publicado:	Public Library of Science (PLoS) 2010
Materias:	Medicine R Science Q
Acceso en línea:	https://doaj.org/article/1a96936e4f244c878bf91392eeef9693
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spelling	oai:doaj.org-article:1a96936e4f244c878bf91392eeef96932021-11-18T07:03:11ZThe illogicality of stock-brokers: psychological experiments on the effects of prior knowledge and belief biases on logical reasoning in stock trading.1932-620310.1371/journal.pone.0013483https://doaj.org/article/1a96936e4f244c878bf91392eeef96932010-10-01T00:00:00Zhttps://www.ncbi.nlm.nih.gov/pmc/articles/pmid/20976157/?tool=EBIhttps://doaj.org/toc/1932-6203<h4>Background</h4>Explanations for the current worldwide financial crisis are primarily provided by economists and politicians. However, in the present work we focus on the psychological-cognitive factors that most likely affect the thinking of people on the economic stage and thus might also have had an effect on the progression of the crises. One of these factors might be the effect of prior beliefs on reasoning and decision-making. So far, this question has been explored only to a limited extent.<h4>Methods</h4>We report two experiments on logical reasoning competences of nineteen stock-brokers with long-lasting vocational experiences at the stock market. The premises of reasoning problems concerned stock trading and the experiments varied whether or not their conclusions--a proposition which is reached after considering the premises--agreed with the brokers' prior beliefs. Half of the problems had a conclusion that was highly plausible for stock-brokers while the other half had a highly implausible conclusion.<h4>Results</h4>The data show a strong belief bias. Stock-brokers were strongly biased by their prior knowledge. Lowest performance was found for inferences in which the problems caused a conflict between logical validity and the experts' belief. In these cases, the stock-brokers tended to make logically invalid inferences rather than give up their existing beliefs.<h4>Conclusions</h4>Our findings support the thesis that cognitive factors have an effect on the decision-making on the financial market. In the present study, stock-brokers were guided more by past experience and existing beliefs than by logical thinking and rational decision-making. They had difficulties to disengage themselves from vastly anchored thinking patterns. However, we believe, that it is wrong to accuse the brokers for their "malfunctions", because such hard-wired cognitive principles are difficult to suppress even if the person is aware of them.Markus KnauffClaudia BudeckAnn G WolfKai HamburgerPublic Library of Science (PLoS)articleMedicineRScienceQENPLoS ONE, Vol 5, Iss 10, p e13483 (2010)
institution	DOAJ
collection	DOAJ
language	EN
topic	Medicine R Science Q
spellingShingle	Medicine R Science Q Markus Knauff Claudia Budeck Ann G Wolf Kai Hamburger The illogicality of stock-brokers: psychological experiments on the effects of prior knowledge and belief biases on logical reasoning in stock trading.
description	<h4>Background</h4>Explanations for the current worldwide financial crisis are primarily provided by economists and politicians. However, in the present work we focus on the psychological-cognitive factors that most likely affect the thinking of people on the economic stage and thus might also have had an effect on the progression of the crises. One of these factors might be the effect of prior beliefs on reasoning and decision-making. So far, this question has been explored only to a limited extent.<h4>Methods</h4>We report two experiments on logical reasoning competences of nineteen stock-brokers with long-lasting vocational experiences at the stock market. The premises of reasoning problems concerned stock trading and the experiments varied whether or not their conclusions--a proposition which is reached after considering the premises--agreed with the brokers' prior beliefs. Half of the problems had a conclusion that was highly plausible for stock-brokers while the other half had a highly implausible conclusion.<h4>Results</h4>The data show a strong belief bias. Stock-brokers were strongly biased by their prior knowledge. Lowest performance was found for inferences in which the problems caused a conflict between logical validity and the experts' belief. In these cases, the stock-brokers tended to make logically invalid inferences rather than give up their existing beliefs.<h4>Conclusions</h4>Our findings support the thesis that cognitive factors have an effect on the decision-making on the financial market. In the present study, stock-brokers were guided more by past experience and existing beliefs than by logical thinking and rational decision-making. They had difficulties to disengage themselves from vastly anchored thinking patterns. However, we believe, that it is wrong to accuse the brokers for their "malfunctions", because such hard-wired cognitive principles are difficult to suppress even if the person is aware of them.
format	article
author	Markus Knauff Claudia Budeck Ann G Wolf Kai Hamburger
author_facet	Markus Knauff Claudia Budeck Ann G Wolf Kai Hamburger
author_sort	Markus Knauff
title	The illogicality of stock-brokers: psychological experiments on the effects of prior knowledge and belief biases on logical reasoning in stock trading.
title_short	The illogicality of stock-brokers: psychological experiments on the effects of prior knowledge and belief biases on logical reasoning in stock trading.
title_full	The illogicality of stock-brokers: psychological experiments on the effects of prior knowledge and belief biases on logical reasoning in stock trading.
title_fullStr	The illogicality of stock-brokers: psychological experiments on the effects of prior knowledge and belief biases on logical reasoning in stock trading.
title_full_unstemmed	The illogicality of stock-brokers: psychological experiments on the effects of prior knowledge and belief biases on logical reasoning in stock trading.
title_sort	illogicality of stock-brokers: psychological experiments on the effects of prior knowledge and belief biases on logical reasoning in stock trading.
publisher	Public Library of Science (PLoS)
publishDate	2010
url	https://doaj.org/article/1a96936e4f244c878bf91392eeef9693
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The illogicality of stock-brokers: psychological experiments on the effects of prior knowledge and belief biases on logical reasoning in stock trading.

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