Expectancy theory, new (prospect theory)

A highly mathematical theory aimed at modeling actions under uncertainty in general and on the financial market in particular, and thus making them understandable. The theory is internally consistent; it is insightful and convincing in its individual areas. However, it is disputed whether – as some of its proponents claim – it can serve as a decision-making aid in advance of events on the financial market, which are ultimately always fraught with uncertainty. Older expectation theories (such as George L. S. Shackle’s “theory of potential surprise”), which are at least equivalent in their logical content, do not satisfy this requirement either. Uncertainty as the lack of information regarding the probability of the occurrence of – many, – varying and heterogeneous, and – points in time (dates) related future events on the globalized and interlinked financial market cannot be eliminated by mathematics. – See Behavioural Finance, Valuability, Financial Psychology, Formulas, Financial Mathematics, Idle Money, Imponderables, Information, Asymmetric, Residual Risk, Risk, Structural Uncertainty, Insurance Uncertainties, Volatility. – Cf. Deutsche Bundesbank Monthly Report of September 2005, p. 62 (Volatility, Risk and Uncertainty), ECB Monthly Report of April 2007, p. 36 ff. (Measuring Uncertainty in the Stock Market; Overview):

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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