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Risk and Uncertainty Revisited: A Clarification of Theory and Application

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  • M. J. Alhabeeb

Abstract

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.

Suggested Citation

  • M. J. Alhabeeb, 2022. "Risk and Uncertainty Revisited: A Clarification of Theory and Application," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 14(1), pages 1-1, January.
    • Handle: RePEc:ibn:ijefaa:v:14:y:2022:i:1:p:1
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    References listed on IDEAS

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    1. Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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