Financial Decision-Making in Uncertain Markets

Abstract

The purpose of this study is to explore the financial decision-making process under the uncertain market environment. Through in-depth analysis of market volatility and its driving factors, behavioral finance considerations, investment decision-making framework, risk and return trade-off, management investment strategy and emergency plan in uncertain period, this study puts forward a series of management suggestions for different fields. It is pointed out that understanding macroeconomic information and nonlinear effects is very important for better forecasting market fluctuations. In addition, through the understanding of investors' bias, the decision-making process of investors can be improved, thus reducing investment mistakes. In investment decision-making, the understanding of institutional conflict and the alignment of management objectives and shareholders' interests through governance structure are emphasized. The balance between risk and reward reveals the challenges faced by management in decision-making, while the investment strategy of management discusses the advantages and disadvantages of active and passive management strategies. Finally, the formulation of emergency plan is a key strategy to fight against uncertainty, which requires managers to conduct careful environmental analysis and build an effective communication and cooperation network. The purpose of this study is to provide a comprehensive framework to help understand and deal with the challenges of financial decision-making in uncertain markets.

Citation

Zihang, L. and Ali, M. (2024), "Financial Decision-Making in Uncertain Markets", Ali, M., Choi-Meng, L., Puah, C.-H., Raza, S.A. and Sivanandan, P. (Ed.) Strategic Financial Management, Emerald Publishing Limited, Leeds, pp. 155-167. https://doi.org/10.1108/978-1-83608-106-720241010