Groups, Social Processes, and Decision-making in Finance

• In Event: 4110 - Finance and Its Challengers

Abstract

The paper investigates a double puzzle, empirical and theoretical. Empirically, can we document the influence of groups on financial decisions in investments and trading? Theoretically, if decisions in a group context can be documented, how can we account for them, against the background of the normative models, according to which financial decisions are individualized and atomized? Based on interviews and ethnographic observations with fund managers, analysts and traders, we document here decision making in finance. Theoretically, we argue that financial decisions can be explained if, in addition to cognitive processes, we take into account the impact of social interactions on the decision making process. Social interactions are not restricted to imitation processes, and can be seen here as the efforts deployed by decision makers at maintaining and managing the context of their decisions. We present and discuss empirical evidence, and argue that the study of social interactions can productively contribute to understanding how decisions are made in finance.

Authors

• Alex Preda, King's College London

• Gulnur Muradoglu, Queen Mary University London