The following list of research papers emanate from my PhD thesis and although finished, they are not yet published. The first paper is about to be submitted to the Journal of Personality Psychology (August 2020).
Research Project, research objectives, initial methodology, and research program
The project investigates the structural and cognitive reasons that lead financial agents to underestimate risk and uncertainty and under-price risk assets in periods of economic prosperity. Positing that misleading perceptions can create distorted beliefs, this project centers on the role of externalities. With a multidisciplinary approach the project investigates: (i) the trade-off between financial agents’ perceptions of risk and uncertainty and the actual realities operating within the financial industry; (ii) how financial innovation exacerbates this trade-off; and (iii) the policy actions that can reduce this trade-off by impacting on the development process of perceptions. We believe that policy can induce the financial agents to align uncertainty and risk perception with reality. This will contribute to reducing the levels of leverage, volatility, and risk exposure, making much easier for policy makers to monitor the financial system activities and promoting financial stability.
The challenge of this research is to develop a set of policy and regulatory tools able to impact on the development of the perceptions. Ex-ante regulatory strategies to contain the cost of possible future failure within the financial system (Llewellyn, 2013), specific taxation of the financial transactions (Matheson, 2011) and incentives to create positive externalities (Hellmann et al., 1997) might be the financial policy strategy to follow. We will build a stock-flow consistent agent-based model, a pioneering methodology to study non-linear macroeconomic dynamics. Lastly, the impact of the emerging FinTech sector on the perceptions of financial actors will be studied.
My contribution will be the use of my theory to deconstruct the thinking of the participants to determine their attitude towards risk and provide an in-depth construction of thinking pre- and post-study in order to pinpoint what changes took place in their cognitive complexity before and after risk was assessed.
The study will contribute to the behavioural finance and ABM literature which has overlooked the core role played by perceptions in creating the financial operators' beliefs-behaviors.
In Manchester Metropolitan University, I will be working with a professor who focuses on heuristics and how decisions are made.
I will be collaborating on research that sees his theories and my own theory (CDT) intertwined to determine how a heuristic is deconstructed using Cognitive Intentions; to understand how the underlying process of heuristic decision-making could be identified in an alternate way via Constructed Development; if a person’s Dynamic Intelligence has an impact on their capacity to choose a heuristic in the moment, which would include their moral stance, and a number of outcomes pertaining to these research questions. It would be an interesting exercise that would lend further support to Constructed Development Theory, as well as allow new research in the heuristics field that has not been done before.