Expertise and Expert Performance

In the last several decades, the expertise paradigm has emerged as an important frame for understanding human adaptive intelligence. However, to date the most influential paradigms for the study of financial behaviour and trader psychology have been the rational-economic model and behavioural decision-making (BDM). The field of behavioural finance has made good use of the tools of BDM (e.g. DeBondt, Palm and Wolff, 2004) to explain important departures of market behaviour from the predictions of the efficient markets hypothesis (Fama, 1991). However, such studies largely consist of retrospectively fitting biases from the BDM literature to known market anomalies. Also, BDM typically relies on laboratory experiments and artificial, decontextualised, and typically very simple decision tasks to study decision making. Experts however seem to be at their best in unstructured and highly complex situations where tasks as well as solutions are ill-defined and their performance advantage is very much context-dependent. In contrast, naturalistic decision making (NDM) has to grapple with the problem that real-world settings are ill-suited for controlled experiments; hence explanations of underlying cognitive processes can be sketchy at times.

xDelia builds on evidence from both behavioural decision and expertise research to investigate the key enablers of and differences in financial decision making styles and competences. Expertise research suggests that the novice and the ‘merely’ competent practitioner can be distinguished from the accomplished domain expert by well-identifiable knowledge, skill, and domain competences. Moreover, these research strands have proposed conditions and strategies for learning and performance improvement that provide us with a possible basis to design targeted interventions for competence and expertise development.

A central tenet of the expertise literature is the role of ‘deliberate practice’. Deliberate practice is focused, programmatic, and carried out over extended periods of time. It is guided by conscious performance monitoring, identification of errors, and procedures directed at eliminating errors. It involves appropriate immediate feedback. Such feedback may be self-generated, generated by an expert observer such as a coach or mentor, or in some cases may be usefully generated by appropriate technology. Deliberate practice may involve working on practice tasks with abstract particular performance elements (for example musicians practicing scales) or may involve close attention to performance in real-world setting accompanied by appropriate feedback and critical reflection (for example, professional footballers reviewing video of their match performance).