Decision-making, uncertainty, Brexit and gender in financial markets: a pluralist approach

This thesis examines two aspects of financial traders’ behaviour, fundamental uncertainty and the role of gender, in order to provide a better understanding of financial markets’ functioning. Particularly, it aims to develop a descriptive model of financial traders’ decision-making under fundamental uncertainty based on their own experience and beliefs. Financial traders’ interpretations of fundamental uncertainty and its sources are explored, as are the implications of traders’ understandings for their decision-making. Additionally, the Brexit vote is studied as a paradigm case of financial uncertainty. Furthermore, gender differences and similarities are investigated on the trading floor, as well as social norms about female underrepresentation. This research is based on two rounds of semi-structured interviews (before and after the EU referendum) with UK-based financial traders in 2016, and a 2017 online survey designed to validate the interview results.
Financial traders acknowledge the presence of fundamental uncertainty in the markets: they describe it as unquantifiable and they view the future as not entirely predictable. In the face of these knowledge limitations, traders consistently identify risk and uncertainty as separate concepts. One key result of our before-and-after Brexit-vote interviews, consistent with previous Post-Keynesian research, is that traders recognise uncertainty as a key aspect of the market context they work in. Another result of our post-referendum evidence, however, challenges the conventional wisdom that enhanced uncertainty invariably forces traders to reduce their risk-taking: after a period of time, traders increase their risk-taking, even knowing that they are trading under conditions that remain uncertain.
Previous behavioural/psychological studies show that women tend to be more risk averse than men; by implication, increasing the proportion of women in financial governance could reduce financial instability. Moreover, this research challenges stereotypical beliefs about men’s and women’s behavioural characteristics and provides empirical evidence suggesting that there are social and institutional reasons behind female underrepresentation on the trading floor.