New Delhi, Aug. 8 -- Diverse views, effective aggregation of information and incentives for participants to act on their knowledge are the three key conditions needed for crowds to make better decisions, according to a Morgan Stanley report.

"Wisdom is accompanied by specific conditions," it said, identifying cognitive diversity, aggregation and incentives as the three key factors.

The report examined how collective intelligence works across prediction markets and financial markets. It noted that crowds can be highly accurate when these conditions are present, but can also make poor decisions when one or more of them break down.

According to the report, cognitive diversity is not simply about differences in social characteristics but a...