A BEHAVIORAL PERSPECTIVE ON RISK MANAGEMENT推荐.pdf

CHAPTER 43 A BEHAVIORAL PERSPECTIVE ON RISK MANAGEMENT∗ Andrew W. Lo Traditional risk management approaches emphasize statistical and economic con- siderations. But comprehensive fi nancial risk management should also incorporate the role of human preferences in rational decision making under risk. Since the market turmoil of August and September 1998, skepticism has undoubtedly increased about the relevance of quantitative techniques for the practice of risk management. If, as most industry experts now acknowledge, the general “ fl ight to quality ” and subsequent widening of credit spreads was unprecedented and, therefore, unforecastable, what good are Value - at - Risk measures that are based on the statistics of historical data? These concerns are well - founded but somewhat misplaced in their focus. The fault lies not in the methods but, rather, in the unreal- istic expectations we have in their application. In a broader context, rational decision making under uncertainty requires a focus on three specifi c components, which I have previously described as the “ three P ’ s of total risk management ” : prices, probabilities, and preferences.1 Although any complete risk man- agement protocol should contain elements of all three P ’ s, to date most risk management practices have focused primarily on prices and probabilities, with almost no attention to preferences. In this article, I will emphasize the role of preferences in rational decision mak- ing under risk through three illustrative examples: the nature of loss aversion, the difference between risk and uncertainty, and the interpretation of probabilities. Before launching into these examples, let me emphas