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Radical rationality allows coping with fundamental uncertainty on financial markets

In: Artificial Intelligence and Financial Behaviour

Author

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  • Paolo Sironi

Abstract

The financial services industry is opening the theoretical system to address business and digital trans-formation. More reasonable and biological micro-foundations have emerged and are anchored fundamentally to the generation of sustainable value at investors’ micro-level and for the global ecosystem. These micro-foundations disclose and reconcile the gap between homo economicus and homo sapiens. Their recognition, derived by the theory and principles of Financial Market Transparency (FMT), allows overcoming the limitations of mainstream reference theory that do not conform with reality. With the aid of exponential technologies, leading financial institutions are industrialising new financial services platforms that unlock FMT value by linking in the network - through consequentialist ethic - the level of financial consciousness in individuals and professional intermediaries. The result will be an increasing macro-level antifragility of financial markets, which is more reason-able than searching for an illusory stability in the presence of fundamental uncertainty. Increased reasonability in investment decision-making is the ultimate scope of a transparent, technologically enabled platform in financial services. Also, artificial intelligence faces the same challenges though quicker to adapt to new conditions. AI would fall in a similar gap that excludes reality if not transparently micro-founded on the same human reasonability. This way - facing fundamental uncertainty on the irreversible time - policymakers, financial institutions, digital entrepreneurs, investors and their algorithms learn how to establish value-generating interactions on a level playing field made of reduced information asymmetry.

Suggested Citation

  • Paolo Sironi, 2023. "Radical rationality allows coping with fundamental uncertainty on financial markets," Chapters, in: Riccardo Viale & Shabnam Mousavi & Umberto Filotto & Barbara Alemanni (ed.), Artificial Intelligence and Financial Behaviour, chapter 4, pages 89-110, Edward Elgar Publishing.
  • Handle: RePEc:elg:eechap:21559_4
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