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Financial Decision Making Under Uncertainty: Psychological Coping Methods

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Psychological Perspectives on Financial Decision Making

Abstract

This chapter focuses on investment decision-making under uncertainty. The traditional approach to human decision-making is characterized by its attempts of optimizing and maximizing: optimizing the probability estimates and maximizing expected utility. However, these models often fail in the face of uncertainty, where probability estimates are not precise or simply unknown. The author proposes alternative approaches to the uncertainty challenge within and beyond the context of financial investment and provides preliminary evidence of reducing uncertainty by using frequency counts, single reason, simple heuristics, and decision reference points.

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Correspondence to X. T. (XiaoTian) Wang .

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Wang, X.T.(. (2020). Financial Decision Making Under Uncertainty: Psychological Coping Methods. In: Zaleskiewicz, T., Traczyk, J. (eds) Psychological Perspectives on Financial Decision Making. Springer, Cham. https://doi.org/10.1007/978-3-030-45500-2_9

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