Continuing the posts on behavioural impacts on the markets (in aggregate and individually), we provide a brief description of the areas of Gestalt that effect financial and sports markets.
1) Knowledge Attitudes - We combine data into manageable structures and we have a propensity to analyse such structures individually.
2) Somatic Marker Theory - During the trading experience, one can experience threats that reinforce to induce panic.
3) Representativeness Effect - Market players tend to believe that current trends, cycles and patterns will continue into the future.
4) Persuasion Effect - We are more persuaded by a credible source than by a credible argument.
5) Adaptive Attitudes - People cluster with a combined attitude.
6) Self-Realizing Attitudes - Individuals perform a life role to make them feel that they have achieved something.
7) False Consensus Effect - Traders and leisure punters both tend to overestimate the number of other people that might agree with their perspective.
8) Self-Persuasion Effect - When spectacular society does not match with our beliefs, we change our attitudes rather than accepting the realities.
9) Ego-Defensive Attitudes - Our attitudes are adjusted in apparent confirmation of earlier decisions.
These factors have a complex dynamical impact on financial markets at all levels of operation. It is possible (indeed imperative) to model the behavioural aspects of markets - otherwise you can only perceive a portion of the big picture.
