Novel Cognitive Paradigms to Model Financial Markets and Knowledge Transmission

This paper describes in detail the cognitive distortions studied by Behavioural Finance (BF) and transposes these concepts in the Knowledge Management (KM) context, with the proposal of formally embedding them into cognitive agents, for computational modeling. Orthodox-Economic theory fails in representing the decisional process of individuals in a realistic way, especially regarding the non-rational component of their behavior. By moving beyond those approaches, which assume a completely rational behavior, BF explores the cognitive distortions that could lead to sub-optimal decisions and behaviors. The study of systematic cognitive errors brings to an improvement of KM processes as well, where irrational human behavior affect the efficiency of collaborative groups through possible misinterpretations of data, and implicit knowledge in general. The authors propose a formal modeling technique to represent the cognitive distortions through computational agents, with the aim to create realistic simulations of organizations and social systems in general