The Cognitive Reflection Test and Investment Decision

The Cognitive Reflection Test (CRT), a measure of cognitive reflection, assesses people's capacity and, accordingly, investors' ability to override immediate, reflexive responses in favour of rational answers and decisions. The test is significant in behavioural finance as its questions reveal biases and heuristics, which affect rational investment decisions and choices. The present research employs a sample of Accounting and Finance students, who represent potential future investors and participants in financial markets, to examine the extent to which the respondents engage in rational thinking when answering the test questions. CRT approach aims to evaluate their ability to avoid impulsive actions and rely less on intuitive decision-making (System 1).