Herbert Simon developed an analogy based on a pair of scissors. One blade is cognition and the other is the structure of the environment or the task to be done. You can understand human behavior only if you look at both blades of the scissors.
Our cognition will change with the environment faced. More uncertainty and volatility will affect how we make decisions. Every decision may slow as we wait for confirming information. Decisions will change based on where you are in the business cycle for the market to be traded. The systemic risk of an asset will change with the macro environment. Context is everything.
No comments:
Post a Comment