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Impact of Uncertainty Vis a Vis Risk in Investment Decisions
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Impact of Uncertainty Vis a Vis Risk in Investment Decisions

A special issue of Journal of Risk and Financial Management (ISSN 1911-8074). This special issue belongs to the section "Risk".

Deadline for manuscript submissions: closed (29 July 2022) | Viewed by 13323

Special Issue Editor

Prof. Dr. Govind Hariharan

E-Mail Website
Guest Editor
Department of Economics, Finance and Quantitative Analysis, Coles College of Business, Kennesaw State University, Kennesaw, GA 30144, USA
Interests: impact of risk and uncertainty on health decisions, on personal finance and investment decisions, on technology use

Special Issue Information

Dear Colleagues,

This Special Issue focuses on the broad topic of “Uncertainty vis a vis Risk in Investment Decisions” and will include novel research on how households/individual investors react to and distinguish between real or perceived uncertainty and risk about in making their investment decisions. From uncertainty and risk to their jobs and income to health and longevity, the implications of this distinction on their financial decisions can be significant.

Novel empirical, experimental and theoretical articles on the incorporation of this distinction in portfolio decisions, asset pricing, valuation and risk management are welcome.

Contributions focusing on the determinants of individual/household uncertainty and risk, individual/household level decision making under conditions of uncertainty vis a vis risk and its impact on portfolio choice, individual or household level uncertainty vs. risk in asset allocation models, role of information including social media on individual level uncertainty vs. risk and its impact on financial markets, and valuation of uncertainty and risk reduction are encouraged.

Prof. Dr. Govind Hariharan
Guest Editor

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Journal of Risk and Financial Management is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1400 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • Decision Making under Uncertianty and Risk
  • Asset Allocation
  • Portfolio Management
  • Determinants of Uncertainty and Risk
  • Role of Information in Investment Decisions under Uncertainty
  • Valuation of Uncertainty and Risk Reduction
  • Impact of Uncertainty and Risk on Financial Markets

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Published Papers (3 papers)

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Research

14 pages, 2196 KiB  
Article
Pandemic-Era Uncertainty
by Brent Meyer, Emil Mihaylov, Jose Maria Barrero, Steven J. Davis, David Altig and Nicholas Bloom
J. Risk Financial Manag. 2022, 15(8), 338; https://doi.org/10.3390/jrfm15080338 - 30 Jul 2022
Cited by 6 | Viewed by 2390
Abstract
We examine several measures of uncertainty to make five points. First, equity market traders and executives at nonfinancial firms have shared similar assessments about one-year-ahead uncertainty since the pandemic struck. Both the one-year VIX and our survey-based measure of firm-level uncertainty at a [...] Read more.
We examine several measures of uncertainty to make five points. First, equity market traders and executives at nonfinancial firms have shared similar assessments about one-year-ahead uncertainty since the pandemic struck. Both the one-year VIX and our survey-based measure of firm-level uncertainty at a one-year forecast horizon doubled at the onset of the pandemic and then fell about half-way back to pre-pandemic levels by mid-2021. Second, and in contrast, the 1-month VIX, a Twitter-based Economic Uncertainty Index, and macro forecaster disagreement all rose sharply in reaction to the pandemic but retrenched almost completely by mid-2021. Third, Categorical Policy Uncertainty Indexes highlight the changing sources of uncertainty—from healthcare and fiscal policy uncertainty in spring 2020 to elevated uncertainty around monetary policy and national security as of May 2022. Fourth, firm-level risk perceptions skewed heavily to the downside in spring 2020 but shifted rapidly to the upside from fall 2020 onwards. Perceived upside uncertainty remains highly elevated as of early 2022. Fifth, our survey evidence suggests that elevated uncertainty is exerting only mild restraint on capital investment plans for 2022 and 2023, perhaps because perceived risks are so skewed to the upside. Full article
(This article belongs to the Special Issue Impact of Uncertainty Vis a Vis Risk in Investment Decisions)
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16 pages, 450 KiB  
Article
An Assessment of the Association between Political Orientation and Financial Risk Tolerance
by John Grable, Dee Warmath and Eun Jin Kwak
J. Risk Financial Manag. 2022, 15(5), 199; https://doi.org/10.3390/jrfm15050199 - 24 Apr 2022
Viewed by 2897
Abstract
The purpose of this paper is to present findings from research that was undertaken to answer the following questions. First, to what extent is political orientation associated with financial risk tolerance, and second, to what degree is political orientation predictive of changes in [...] Read more.
The purpose of this paper is to present findings from research that was undertaken to answer the following questions. First, to what extent is political orientation associated with financial risk tolerance, and second, to what degree is political orientation predictive of changes in risk tolerance across periods? Using panel collected before and after the 2020 U.S. presidential election, it was determined that the strength of affiliation with the Republican and Democratic Parties was descriptive of cross-sectional financial risk tolerance. Republicans were found to exhibit greater risk tolerance compared with Democrats. Across periods, the risk tolerance of Republicans was less stable, whereas the financial risk tolerance of Democrats was more stable. A significant decrease in risk tolerance was observed for those affiliating as a Republican pre-election to post-election. When political orientation was measured on a scale, the decrease in risk tolerance across periods for Republicans was significant. The risk tolerance of those affiliating as a Democrat increased across the periods but at a lower rate than in the drop in scores among Republicans. When viewed across the variables of interest in this study, political orientation was found to be an important descriptor of FRT. Full article
(This article belongs to the Special Issue Impact of Uncertainty Vis a Vis Risk in Investment Decisions)
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14 pages, 661 KiB  
Article
Behavioral Decision Making in Normative and Descriptive Views: A Critical Review of Literature
by Junyi Chai, Zhiquan Weng and Wenbin Liu
J. Risk Financial Manag. 2021, 14(10), 490; https://doi.org/10.3390/jrfm14100490 - 14 Oct 2021
Cited by 6 | Viewed by 7110
Abstract
Recent studies on decision analytics frequently refer to the topic of behavioral decision making (BDM), which focuses on behavioral components of decision analytics. This paper provides a critical review of literature for re-examining the relations between BDM and classical decision theories in both [...] Read more.
Recent studies on decision analytics frequently refer to the topic of behavioral decision making (BDM), which focuses on behavioral components of decision analytics. This paper provides a critical review of literature for re-examining the relations between BDM and classical decision theories in both normative and descriptive reviews. We attempt to capture several milestones in theoretical models, elaborate on how the normative and descriptive theories blend into each other, thus motivating the mostly prescriptive models in decision analytics and eventually promoting the theoretical progress of BDM—an emerging and interdisciplinary field. We pay particular attention to the decision under uncertainty, including ambiguity aversion and models. Finally, we discuss the research directions for future studies by underpinning the theoretical linkages of BDM with fast-evolving research areas, including loss aversion, reference dependence, inequality aversion, and models of quasi-maximization mistakes. This paper helps to understand various behavioral biases and psychological factors when making decisions, for example, investment decisions. We expect that the results of this research can inspire studies on BDM and provide proposals for mechanisms for the development of D-TEA (decision—theory, experiments, and applications). Full article
(This article belongs to the Special Issue Impact of Uncertainty Vis a Vis Risk in Investment Decisions)
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