How financial market constraints and technocratic decision making impacted on European political citizenship and democracy during the euro crisis

2018 ◽  
pp. 215-238 ◽  
Author(s):  
Robert Csehi
Keyword(s):  
Decision Making ◽  
Financial Market ◽  
Euro Crisis ◽  
Political Citizenship

Modern Financial Market Theory – A Critique Based on the Logic of Human Action

2021 ◽  
Vol 54 (3) ◽  
pp. 447-467
Author(s):  
Thorsten Polleit
Keyword(s):  
Decision Making ◽  
Financial Markets ◽  
Financial Market ◽  
Real World ◽  
Rational Expectation ◽  
Efficient Market Hypothesis ◽  
Human Action ◽  
Market Theory ◽  
Expectation Theory ◽  
Market Economics

The modern financial market theory (MFMT) – based on the efficient market hypothesis, rational expectation theory, and modern portfolio theory – has become the standard approach in financial market economics. In this article, the MFMT will be critically ­reviewed using the logic of human action (or: praxeology) as an epistemological meta­theory. It will be shown that the MFMT exhibits (praxeo-)logical deficiencies so that it cannot provide investors with well-founded decision-making support in real-world financial markets.

scholarly journals Three Different Ways Synchronization can Cause Contagion in Financial Markets

2018 ◽  
Author(s):  
Jorgen Vitting Andersen ◽  
Naji Masaad
Keyword(s):  
Decision Making ◽  
Financial Markets ◽  
Financial Market ◽  
Change Blindness ◽  
Market Performance ◽  
Large Change ◽  
Trading Strategies ◽  
Fire Dynamics ◽  
Integrate And Fire ◽  
Human Decision

We introduce tools to capture the dynamics of three different pathways, in which the synchronization of human decision making could lead to turbulent periods and contagion phenomena in financial markets. The first pathway is caused when stock market indices, seen as a set of coupled integrate-and-fire oscillators, synchronize in frequency. The integrate-and-fire dynamics happens due to "change blindness", a trait in human decision making where people have the tendency to ignore small changes, but take action when a large change happens. The second pathway happens due to feedback mechanisms between market performance and the use of certain (decoupled) trading strategies. The third pathway occurs through the effects of communication and its impact on human decision making. A model is introduced in which financial market performance has an impact on decision making through communication between people. Conversely, the sentiment created via communication has an impact on financial market performance.

Conviction Narrative Theory and Understanding Decision-Making in Economics and Finance

2018 ◽  
Author(s):  
David Tuckett
Keyword(s):  
Decision Making ◽  
Information Processing ◽  
Financial Market ◽  
Narrative Theory ◽  
Economic Outcomes ◽  
Animal Spirits ◽  
Money Managers ◽  
Radical Uncertainty ◽  
Human Capacity ◽  
Market Instability

This chapter describes the radically uncertain context faced by money managers and how they cope by developing conviction narratives. It then generalizes these findings to introduce a wider theory of decision-making under radical uncertainty, termed Conviction Narrative Theory (CNT). CNT differs from standard approaches to decision-making in economics and behavioural psychology that are limited to theories of efficient and inefficient information processing in contexts where data is available to calculate future probabilities. In radical uncertainty, we cannot know which bits of information are useful. CNT explains the human capacity to cope despite this situation: actors organize their experience through narratives and use the emotions attaching to them to feel the conviction to act. In effect, CNT operationalizes Keynes’ (1936) formulation of animal spirits as a human solution to radical uncertainty; and it provides more plausible and empirically substantiated microfoundations on which to build understanding of aggregate economic outcomes, the development of monocultures, and financial market instability.

ON THE NEW TRANSFORMATION-BASED APPROACH TO VALUE-AT-RISK

2008 ◽  
pp. 278-297
Author(s):  
G. P. Samanta
Keyword(s):  
Decision Making ◽  
At Risk ◽  
Normal Distribution ◽  
Financial Market ◽  
Wide Class ◽  
Value At Risk ◽  
Main Issue ◽  
Market Returns ◽  
Empirical Results ◽  
Decision Making Problem

This chapter deals with the measurement of Value-at-Risk parameter for a portfolio using historical returns. The main issue here is the estimation of suitable percentile of the underlying return distribution. If returns were normal variates, the task would have been very simple. But it is well documented in the literature that financial market returns seldom follow normal distribution. So, one has to identify suitable distribution, mostly other than normal, for the returns and find out the percentile of the identified distribution. The class of non-normal distribution, however, is extremely wide and heterogeneous, and one faces a decision-making problem of identifying the best distributional form from such a wide class of potential alternatives. In order to simplify the task of handling non-normality while estimating VaR, we adopt the transformation-based approach used in Samanta (2003). The performance of the transformation-based approach is compared with two widely used VaR models. Empirical results are quite encouraging and identify the transformation-based approach as a useful and sensible alternative.

Russian Holding Company Groups: New Empirical Evidence

2007 ◽  
pp. 98-111 ◽  
Author(s):  
S. Avdasheva
Keyword(s):  
Decision Making ◽  
Corporate Governance ◽  
Empirical Evidence ◽  
Internal Structure ◽  
Survey Data ◽  
Financial Market ◽  
Sample Survey ◽  
Insider Ownership ◽  
Holding Company ◽  
Sample Survey Data

The article is devoted to Russian holding company groups. New sample survey data allow discussing the scale of expansion and internal structure of these groups, incentives to create them, the patterns of corporate governance and decision-making, scale of their internal financial market. In spite of the fact that holding company groups are extremely heterogeneous, most of them constitute new companies, which overcome the weaknesses of insider ownership model, with converged ownership and management. Companies in the holdings retain certain degree of autonomy in decision-making, and at the same time this process is connected with corporate governance procedures. Still the trends in the development of corporate governance are controversial and it is too early to conclude that the model of ownership separated from management inside the holding company groups has definitely proved its viability.

Emotional Finance – Zum Einfluss von Emotionen auf Investmententscheidungen

2021 ◽  
Vol 62 (2) ◽  
pp. 123-133
Author(s):  
Leef H. Dierks ◽  
Sonja Tiggelbeck
Keyword(s):  
Decision Making ◽  
Financial Market ◽  
Financial Services ◽  
Cognitive Biases ◽  
Decision Making Under Uncertainty ◽  
Individual Decision ◽  
Individual Decision Making

Emotional Finance emphasizes that (unconscious) emotions have a decisive impact on individual decision-making under uncertainty and thus on (financial) market developments. Based on the events surrounding German financial services provider Wirecard, this contribution discusses aspects of rationality versus irrationality and illustrates how cognitive biases and emotions affect and can potentially flaw decision-making. Emotional Finance zeigt wie (unbewusste) Emotionen der Marktteilnehmer individuelle Investitionsentscheidungen und damit das (Finanz-)Marktgeschehen maßgeblich beeinflussen können. Dieser Beitrag stellt das Zusammenspiel kognitiver Verzerrungen und Emotionen im Spannungsfeld von Rationalität und Irrationalität sowie die daraus erwachsenden Konsequenzen auf die Entscheidungsfindung exemplarisch am Fall des ­Finanzdienstleisters Wirecard AG dar. Verdeutlicht wird, weshalb private und Institutionelle Investoren dem Narrativ des Unternehmens trotz offensichtlicher bilanzieller Ungereimtheiten bis zuletzt Vertrauen entgegenbrachten.

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