Open AccessRisk and Uncertainty Revisited: A Clarification of Theory and Application
Author(s) -
M. J. Alhabeeb
Publication year - 2021
Publication title -
international journal of economics and finance
Language(s) - English
Resource type - Journals
eISSN - 1916-9728
pISSN - 1916-971X
DOI - 10.5539/ijef.v14n1p1
Subject(s) - confusion , rendering (computer graphics) , epistemology , meaning (existential) , focus (optics) , core (optical fiber) , risk analysis (engineering) , actuarial science , management science , computer science , psychology , economics , business , artificial intelligence , philosophy , physics , psychoanalysis , optics , telecommunications
In addition to the obvious public confusion and lack of distinction between the terms, risk and uncertainty and other related concepts, the interchangeable use seems to seep into the academic and professional research. According to a 2018 study by De Groot and Thurik, it was reported that 88.3% of articles in this topic, across the related fields, did not adhere to the distinction between risk and uncertainty, rendering all the undesirable theoretical and empirical consequences. This paper is intended to revisit the concepts of risk and uncertainty, not only clarifying the meaning and use of the terms, but also shedding a light on differentiating all the related concepts. The focus is on risk, being the core element directly related to the success and failure of all financial and managerial decision making. The approach is not only conceptual, but also supported by mathematical and numerical applications.