Intuition and Professional Competence: Intuitive Versus Rational Forecasting of the Stock Market

Abstract

Abstract This article argues that intuition is a crucial component of professional competence, and provides empirical evidence to supportthis claim. It was found that in most cases intuitive predictions of stock market development are better than rationally justifiedones and that experts predict more precisely than novices on a descriptive data level. The discussion links these findingsto the literature about expertise and intuition. Research on professional expertise theoretically indicates intuition as acrucial component of that expertise. This article focuses on the exercise of intuition in the domain of investment. Stockmarket investment decisions rely on forecasts of market development. As complete information is not available, entirely rationaldecisions cannot be made, and it becomes necessary to rely on intuition. An overview of theories on intuition are presentedfollowed by discussion of an empirical study in which 32 persons of varying experience in the stock market used intuitionas well as rational justifications to predict stock rates.