Traders Risks, Decisions, and Management in Financial Markets

by Fenton-O'Creevy, Mark; Nicholson, Nigel; Soane, Emma; Willman, Paul

• ISBN13: 9780199269488
• ISBN10: 0199269483
• Format: Hardcover
• Copyright: 2004-12-02
• Publisher: Oxford University Press

Summary

This is a book about traders in financial markets: what they do, the kind of people they are, how they perceive the world they inhabit, how they make decisions and take risks. This is also a book about how traders are managed - the best and the worst examples - and about the institutions theyinhabit: firms, markets, cultures, and theories of how the world works. How these institutions function, how traders are managed, and how traders view the world, all have profound effects on the wider financial environment. This book explores these relationships and their implications theoreticallyand empirically. The data discussed in this book draw on a three-year project researching the psychological and social influences on the behaviour and performance of traders in investment banks. 118 traders and managers in four leading organizations participated. Data were collected through semi-structuredinterviews supplemented by questionnaires, measures of personality, risk propensity and a novel computer based measure designed to assess illusion of control and other cognitive biases.The authors' approach to writing this book is explicitly interdisciplinary. They draw on sociology, psychology and economics in order to illuminate the work of traders and the world they inhabit. The book is a significant contribution to the growing body of research and literature which suggests that if we are to effectively understand financial markets and the actors who inhabit them, the insights of neo-classical financial economics need supplementing with a broader range of social scienceapproaches.The book will be of value to researchers interested in the functioning of financial institutions and markets, to those with an interest in market regulation and to practitioners wishing to benefit from an analytical perspective on the challenges facing traders and their managers.

Table of Contents

List of Figures	viii
List of Tables	ix
1 INTRODUCTION	1	(9)
Traders, Markets, and Social Science
2 THE GROWTH OF FINANCIAL MARKETS AND THE ROLE OF TRADERS	10	(18)
3 ECONOMIC, PSYCHOLOGICAL, AND SOCIAL EXPLANATIONS OF MARKET BEHAVIOUR	28	(23)
4 TRADERS AND THEIR THEORIES	51	(23)
5 A FRAMEWORK FOR UNDERSTANDING TRADER PSYCHOLOGY	74	(36)
6 RISK TAKERS	110	(35)
Profiling Traders
7 BECOMING A TRADER	145	(33)
8 MANAGING TRADERS	178	(19)
9 CONCLUSIONS	197	(15)
10 APPENDIX	212	(9)
The Study
References	221	(16)
Index	237