Dataset Information

Market Imitation and Win-Stay Lose-Shift Strategies Emerge as Unintended Patterns in Market Direction Guesses.

ABSTRACT: Decisions made in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market provides a rich environment to study how people make decisions since responding to market uncertainty needs a constant update of these strategies. For this purpose, we run a lab-in-the-field experiment where volunteers are given a controlled set of financial information -based on real data from worldwide financial indices- and they are required to guess whether the market price would go "up" or "down" in each situation. From the data collected we explore basic statistical traits, behavioural biases and emerging strategies. In particular, we detect unintended patterns of behavior through consistent actions, which can be interpreted as Market Imitation and Win-Stay Lose-Shift emerging strategies, with Market Imitation being the most dominant. We also observe that these strategies are affected by external factors: the expert advice, the lack of information or an information overload reinforce the use of these intuitive strategies, while the probability to follow them significantly decreases when subjects spends more time to make a decision. The cohort analysis shows that women and children are more prone to use such strategies although their performance is not undermined. Our results are of interest for better handling clients expectations of trading companies, to avoid behavioural anomalies in financial analysts decisions and to improve not only the design of markets but also the trading digital interfaces where information is set down. Strategies and behavioural biases observed can also be translated into new agent based modelling or stochastic price dynamics to better understand financial bubbles or the effects of asymmetric risk perception to price drops.

SUBMITTER: Gutierrez-Roig M

PROVIDER: S-EPMC4988703 | biostudies-literature | 2016

REPOSITORIES: biostudies-literature

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Publications

Market Imitation and Win-Stay Lose-Shift Strategies Emerge as Unintended Patterns in Market Direction Guesses.

Gutiérrez-Roig Mario M Segura Carlota C Duch Jordi J Perelló Josep J

PloS one 20160817 8

Decisions made in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market provides a rich environment to study how people make decisions since responding to market uncertainty needs a constant update of these strategies. For this purpose, we run a lab-in-the-field experiment where volunteers are given a controlled set of financial information -based on real data from worldwide financial indices- ...[more]

PMID: 27532219

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Project description:The use of 'explicitly metacognitive' learning strategies has been proposed as an explanation for uniquely human capacities for cumulative culture. Such strategies are proposed to rely on explicit, system-2 cognitive processes, to enable advantageous selective copying. To investigate the plausibility of this theory, we investigated participants' ability to make flexible learning decisions, and their metacognitive monitoring efficiency, under executive function (EF) load. Adult participants completed a simple win-stay lose-shift (WSLS) paradigm task, intended to model a situation where presented information can be used to inform response choice, by copying rewarded responses and avoiding those that are unrewarded. This was completed alongside a concurrent switching task. Participants were split into three conditions: those that needed to use a selective copying, WSLS strategy, those that should always copy observed information, and those that should always do the opposite (Expt 1). Participants also completed a metacognitive monitoring task alongside the concurrent switching task (Expt 2). Conditions demanding selective strategies were more challenging than those requiring the use of one rule consistently. In addition, consistently copying was less challenging than consistently avoiding observed stimuli. Differences between selectively copying and always copying were hypothesised to stem from working memory requirements rather than the concurrent EF load. No impact of EF load was found on participants' metacognitive monitoring ability. These results suggest that copying decisions are underpinned by the use of executive functions even at a very basic level, and that selective copying strategies are more challenging than a combination of their component parts. We found minimal evidence that selective copying strategies relied on executive functions any more than consistent copying or deviation. However, task experience effects suggested that ceiling effects could have been masking differences between conditions which might be apparent in other contexts, such as when observed information must be retained in memory.

Project description:The striatum and hippocampus are widely held to be components of distinct memory systems that can guide competing behavioral strategies. However, some electrophysiological studies have suggested that neurons in both structures encode spatial information and may therefore make similar contributions to behavior. In rats well trained to perform a win-stay radial maze task, we recorded simultaneously from dorsal hippocampus and from multiple striatal subregions, including both lateral areas implicated in motor responses to cues and medial areas that work cooperatively with hippocampus in cognitive operations. In each brain region, movement through the maze was accompanied by the continuous sequential activation of sets of projection neurons. Hippocampal neurons overwhelmingly were active at a single spatial location (place cells). Striatal projection neurons were active at discrete points within the progression of every trial-especially during choices or following reward delivery-regardless of spatial position. Place-cell-type firing was not observed even for medial striatal cells entrained to the hippocampal theta rhythm. We also examined neural coding in earlier training sessions, when rats made use of spatial working memory to guide choices, and again found that striatal cells did not show place-cell-type firing. Prospective or retrospective encoding of trajectory was not observed in either hippocampus or striatum, at either training stage. Our results indicate that, at least in this task, dorsal hippocampus uses a spatial foundation for information processing that is not substantially modulated by spatial working memory demands. By contrast, striatal cells do not use such a spatial foundation, even in medial subregions that cooperate with hippocampus in the selection of spatial strategies. The progressive dominance of a striatum-dependent strategy does not appear to be accompanied by large changes in striatal or hippocampal single-cell representations, suggesting that the conflict between strategies may be resolved elsewhere.

Dataset Information

Market Imitation and Win-Stay Lose-Shift Strategies Emerge as Unintended Patterns in Market Direction Guesses.

Publications

Market Imitation and Win-Stay Lose-Shift Strategies Emerge as Unintended Patterns in Market Direction Guesses.

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