The use of risk in understanding financial decisions and institutional uncertainty

Jocelyn Pixley*

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    11 Citations (Scopus)
    46 Downloads (Pure)

    Abstract

    The idea that rationality and emotional factors are involved in financial decisions is well accepted in many economic approaches and in organisation theory. This paper compares specific relevant arguments in behavioural finance and sociology. The aim is to show the implications of these different analyses for the financial sector. The question is whether behavioural finance emphasises the concept of risk more than uncertainty. The paper suggests that cognitive and emotional factors are usefully examined in light of approaches from both behavioural finance and sociology. The first looks at individuals primarily, the second at structural (policy and market) factors. I argue that the latter influence organisational choices of different time orientations towards the future. In exploring the potential of this approach, the paper poses three organisational decision models, that take uncertainty and its relevant social institutions into account, while acknowledging that time preferences and discounting by individuals are well-explored in behavioural economic frameworks.

    Original languageEnglish
    Pages (from-to)209-222
    Number of pages14
    JournalJournal of Socio-Economics
    Volume39
    Issue number2
    DOIs
    Publication statusPublished - Apr 2010

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