Are investors really willing to agree to disagree? An experimental investigation of how disagreement and attention to disagreement affect trading behavior

Using a series of laboratory markets, this paper provides evidence that a willingness to engage in speculative trade is largely driven by a failure of traders to account for information about value implicit in other traders’ actions and that this behavior arises because traders construct myopic mental models that ignore the perspective of other traders. In a baseline set of markets, where traders are prompted to estimate fundamental value but are not overtly prompted to consider disagreement, I find that traders are generally insensitive to adverse selection and readily engage in suboptimal, speculative trade. Moreover, this effect does not decline across trials suggesting that market feedback alone is unlikely to correct traders’ behavior. In contrast, when traders are prompted to assess disagreement over asset values or when they trade in more transparent markets, they appear less willing to “agree to disagree.” These results provide insight into why investors depart from rational trading strategies and how investor psychology will influence trading behavior.     

Neuroticism and responses to social comparison among cancer patients

The present study examined how the effects of three audiotapes containing different types of social comparison information on the mood of cancer patients depended on the level of neuroticism. On the procedural tape, a man and woman discussed the process of radiation therapy, on the emotion tape, they focussed on emotional reactions to their illness and treatment, while on the coping tape they focussed on the way they had been coping. A validation study among 115 students showed that the tapes were perceived as they were intended. The main study was conducted among 226 patients who were about to undergo radiation therapy. Compared to patients in the control group, as patients were higher in neuroticism, they reported less negative mood after listening to the procedural and the coping tape. Furthermore, as patients were higher in neuroticism, they reported less negative mood after listening to the coping tape than to the emotion tape. Copyright © 2009 John Wiley & Sons, Ltd.     

Discourse-mediation of the mapping between language and the visual world: Eye movements and mental representation

Two experiments explored the mapping between language and mental representations of visual scenes. In both experiments, participants viewed, for example, a scene depicting a woman, a wine glass and bottle on the floor, an empty table, and various other objects. In Experiment 1, participants concurrently heard either ‘The woman will put the glass on the table’ or ‘The woman is too lazy to put the glass on the table’. Subsequently, with the scene unchanged, participants heard that the woman ‘will pick up the bottle, and pour the wine carefully into the glass.’ Experiment 2 was identical except that the scene was removed before the onset of the spoken language. In both cases, eye movements after ‘pour’ (anticipating the glass) and at ‘glass’ reflected the language-determined position of the glass, as either on the floor, or moved onto the table, even though the concurrent (Experiment 1) or prior (Experiment 2) scene showed the glass in its unmoved position on the floor. Language-mediated eye movements thus reflect the real-time mapping of language onto dynamically updateable event-based representations of concurrently or previously seen objects (and their locations).     

Structural equations and causation: six counterexamples

Hall [(2007), Philosophical Studies, 132, 109–136] offers a critique of structural equations accounts of actual causation, and then offers a new theory of his own. In this paper, I respond to Hall’s critique, and present some counterexamples to his new theory. These counterexamples are then diagnosed.

Identifying Variables Responsible for Data not Missing at Random

When data are not missing at random (NMAR), maximum likelihood (ML) procedure will not generate consistent parameter estimates unless the missing data mechanism is correctly modeled. Understanding NMAR mechanism in a data set would allow one to better use the ML methodology. A survey or questionnaire may contain many items; certain items may be responsible for NMAR values in other items. The paper develops statistical procedures to identify the responsible items. By comparing ML estimates (MLE), statistics are developed to test whether the MLEs are changed when excluding items. The items that cause a significant change of the MLEs are responsible for the NMAR mechanism. Normal distribution is used for obtaining the MLEs; a sandwich-type covariance matrix is used to account for distribution violations. The class of nonnormal distributions within which the procedure is valid is provided. Both saturated and structural models are considered. Effect sizes are also defined and studied. The results indicate that more missing data in a sample does not necessarily imply more significant test statistics due to smaller effect sizes. Knowing the true population means and covariances or the parameter values in structural equation models may not make things easier either. The research was supported by NSF grant DMS04-37167, the James McKeen Cattell Fund.     

A connectionist model of a continuous developmental transition in the balance scale task

A connectionist model of the balance scale task is presented which exhibits developmental transitions between ‘Rule I’ and ‘Rule II’ behavior [Siegler, R. S. (1976). Three aspects of cognitive development. Cognitive Psychology,8, 481–520.] as well as the ‘catastrophe flags’ seen in data from Jansen and van der Maas [Jansen, B. R. J., & van der Maas, H. L. J. (2001). Evidence for the phase transition from Rule I to Rule II on the balance scale task. Developmental Review, 21, 450–494]. The model extends a connectionist model of this task [McClelland, J. L. (1989). Parallel distributed processing: Implications for cognition and development. In R. G. M. Morris (Ed.), Parallel distributed processing: Implications for psychology and neurobiology (pp. 8–45). Oxford: Clarendon Press] by introducing intrinsic variability into processing and by allowing the network to adapt during testing in response to its own outputs. The simulations direct attention to several aspects of the experimental data indicating that children generally show gradual change in sensitivity to the distance dimension on the balance scale. While a few children show larger changes than are characteristic of the model, its ability to account for nearly all of the data using continuous processes is consistent with the view that the transition from Rule I to Rule II behavior is typically continuous rather than discrete in nature.     

On the language specificity of basic number processing: transcoding in a language with inversion and its relation to working memory capacity

Transcoding Arabic numbers from and into verbal number words is one of the most basic number processing tasks commonly used to index the verbal representation of numbers. The inversion property, which is an important feature of some number word systems (e.g., German einundzwanzig [one and twenty]), might represent a major difficulty in transcoding and a challenge to current transcoding models. The mastery of inversion, and of transcoding in general, might be related to nonnumerical factors such as working memory resources given that different elements and their sequence need to be memorized and manipulated. In this study, transcoding skills and different working memory components in Austrian (German-speaking) 7-year-olds were assessed. We observed that inversion poses a major problem in transcoding for German-speaking children. In addition, different components of working memory skills were differentially correlated with particular transcoding error types. We discuss how current transcoding models could account for these results and how they might need to be adapted to accommodate inversion properties and their relation to different working memory components.     

Changing explicit and implicit attitudes: The case of self-esteem

Three experiments investigated predictions concerning asymmetrical patterns of implicit and explicit self-esteem change. Specifically, we investigated the influence of knowledge about the own self that is momentarily salient as well as the influence of affective valence associated with the self in memory on implicit and explicit self-esteem. The latter was induced by evaluative conditioning, the former by directed thinking about oneself. We found that while evaluative conditioning changed implicit but not explicit self-esteem (Experiment 1), thinking about the own self altered explicit but not implicit self-esteem (Experiment 2). Moreover, in a third experiment, it could be shown that the effect of evaluative conditioning can spill over to the explicit level when participants are asked to focus on their feelings prior to making their self-report judgements (Experiment 3). Implications of our results are discussed in terms of recent controversies regarding dual-process models of attitudes and associative versus propositional modes of information processing.     

When head is tempered by heart: Heart rate variability modulates perception of other-blame reducing anger

This study examined the relationship between heart rate variability (HRV), as an index of individual differences in emotion regulation, and perception of other-blame, as a mechanism of anger induction. The physiological responses were recorded while subjects read a story from a computer screen. The story narrated a negative event in self-referred way -dismissal from a job as the result of a colleague’s action- under conditions of intentionality versus non-intentionality. Cognitive and emotional variables were assessed by questionnaire immediately after the physiological test. The resulting structural model supports the conclusion that HRV exerts its regulatory influence directly on perception of other-blame rather than on emotion. In situations of intentionality, individuals with higher HRV make less extreme evaluation of the offender’s blame, versus those with lower HRV, thus leading to a reduction in anger reaction. These results suggest that HRV is a direct index of cognitive rather than emotional regulation.     

The Mental Model Theory of Conditionals: A Reply to Guy Politzer

This paper replies to Politzer’s (2007) criticisms of the mental model theory of conditionals. It argues that the theory provides a correct account of negation of conditionals, that it does not provide a truth-functional account of their meaning, though it predicts that certain interpretations of conditionals yield acceptable versions of the ‘paradoxes’ of material implication, and that it postulates three main strategies for estimating the probabilities of conditionals.