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TradersRisks, Decisions, and Management in Financial Markets$
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Mark Fenton-O'Creevy, Nigel Nicholson, Emma Soane, and Paul Willman

Print publication date: 2004

Print ISBN-13: 9780199269488

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780199269488.001.0001

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Traders, Markets, and Social Science

(p.1) Chapter 1 Introduction

Mark Fenton-O'Creevy

Nigel Nicholson

Emma Soane

Paul Willman

Oxford University Press

Professional traders utilize market imperfections through lower transaction costs, access to privileged information, critical mass, or proprietary knowledge and models. To be able to understand the role and work of the trader, we must first understand the neoclassical paradigm of efficient markets and rational pricing and how this no longer becomes valid at margins and how professional traders benefit and contribute to this event. Also, this paradigm relies on the assumption that a group of rational investors deter pricing anomalies through arbitrage when there are no uniformly rational investors. The study relies on interviews conducted with 118 traders and trade managers in four large investment banks in the City of London to meet the following concerns: decision-making and risk management, the role of finance professionals in these markets, and a synthesis of economics, sociology, and cognitive and social psychology in analysing the various approaches and paradigms of traders.

Keywords:   market imperfections, decision-making, risk management, finance professionals, economics, sociology, cognitive psychology, social psychology

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