The Mind Process

Part of the SpringerBriefs in Finance book series (BRIEFSFINANCE)


The sense of time and financial players’ behavior is the central theme of this chapter. The notion of “intrinsic time”, a dimensionless time scale that counts the number of trading opportunities that occur regardless of the calendar time that passes between them, is explained to highlight the difference in investors’ perceptions and how to use this fact as a tool in understanding the processes at play and the biases to identify and avoid. As new information is constantly entering the market financial participants need to revise their expectations according to their own utility perception. As such the study of utility is important to understand the financial marketplace. The key element in any information content is the surprise element. Surprise is experienced only if an unexpected outcome occurs from which a new or different utility per individual is derived. Bearing in mind that information is a decreasing function of probability, we introduce an innovative subjective utility theory as per the findings of Viole and Nawrocki: the “Multiple Heterogeneous Benchmark Utility Functions”. Bayes’ theorem and fuzzy logic that has found application in many contexts are presented as a device to effectively account for “probabilities” in the decision-making process under conditions of uncertainty.


Fuzzy Logic Prospect Theory Expected Utility Theory Framing Effect Utility Perception 
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Copyright information

© The Author(s) 2013

Authors and Affiliations

  1. 1.LondonUK

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