News About The Stock Market Lately

The News Has Been Full Of Stories Lately About The Stock Market Pro

The news has been full of stories lately about the stock market problems, sub-prime mortgages, and ponzi schemes. All of these required people to make decisions. Research one of the stories and discuss how motivation influenced people to make such terrible decisions. Had exponential discounting played a part in the decision(s) that you had researched. If so, how? Lately, the stock market has experienced unprecedented volatility – wild ups and downs. Discuss how stock trading has created a lot of this volatility and the decisions for stock traders to buy and sell wildly in terms of hyperbolic discounting. Discuss a recent decision that you made (purchase an automobile or home, change jobs, etc.). How did motivation and emotions influence your decision? Did you experience any internal conflict (a battle between what you wanted versus what you should do)? How did you resolve this conflict? Recently, a number of major banks have rejected federal bailout money citing that they did not like the rules that the government placed on them if they took the cash infusion. Research these decisions and report your findings. Discuss how self-serving reasoning could play a part in these decisions? EACH RESPONSE QUESTION SHOULD BE 200 WORDS MINIMUM!!!

Paper For Above instruction

The series of recent scandals and crises in the stock market, including issues with sub-prime mortgages and Ponzi schemes, illustrate complex psychological and economic decision-making processes influenced heavily by human motivation and cognitive biases. One illustrative case is the sub-prime mortgage crisis of 2007-2008, where motivated by the allure of quick profits and driven by widespread investor and lender enthusiasm, many participants overlooked the risks involved. Motivational factors such as greed and the desire for financial gain prompted individuals and institutions to engage in risky lending and borrowing activities. Exponential discounting, a concept from behavioral economics, further exacerbated poor decision-making by causing individuals to undervalue future risks in favor of immediate rewards. As people heavily discounted the long-term consequences of sub-prime mortgage defaults, they prioritized short-term gains, ignoring the mounting financial instability. This preference for immediate gratification reflects how exponential discounting contributed to widespread risky financial behaviors, ultimately triggering the global financial crisis. Therefore, motivation fueled risky decisions, and exponential discounting minimized perceived risks, demonstrating the profound impact of cognitive biases on financial decisions in turbulent markets.

The recent unprecedented volatility in the stock market has been driven significantly by trading behaviors characterized by hyperbolic discounting. Unlike exponential discounting, which assumes consistent decreasing valuation over time, hyperbolic discounting causes individuals to heavily favor immediate gains over future benefits, leading to impulsivity and erratic trading patterns. Traders often buy high during market surges driven by greed and fear, then rapidly sell during downturns to realize short-term gains or cut losses, exacerbating market swings. This cyclical behavior, motivated by the desire for quick profits and the emotional thrill of rapid trading, amplifies volatility. The psychological tendency to overvalue immediate rewards makes traders more susceptible to impulsive decisions, often disregarding long-term investment strategies. Consequently, hyperbolic discounting fosters a cycle of impulsive buying and selling, intensifying market fluctuations. This phenomenon demonstrates how cognitive biases, driven by motivation for rapid gains and emotional reactions, contribute directly to the current volatile state of financial markets, reflecting the deep influence of psychological factors on economic stability.

In my recent decision to purchase a new automobile, motivation and emotions played crucial roles. The desire for increased independence, comfort, and improved transportation motivated my purchase, while emotions such as excitement and impatience influenced my decision process. I experienced internal conflict between my financial limitations—knowing I should save more—and the immediate gratification of owning a new car. This conflict was challenging, as I rationalized that the long-term benefits of reliability and status justified the expense. To resolve this, I weighed the emotional satisfaction against the financial consequences, ultimately choosing to proceed with the purchase by setting a budget and securing favorable financing terms. This decision was driven by the motivation for personal convenience and emotional satisfaction, combined with a conscious effort to mitigate internal conflict through careful planning. The process highlighted how motivation and emotions can influence decision-making, sometimes overriding purely rational considerations, but also how rational strategies can help align desires with responsible choices.

Recently, several major banks refused federal bailout funds, criticizing the accompanying regulatory conditions. This decision was influenced by concerns over autonomy and reputation. Banks argued that accepting government aid under restrictive rules could damage their independence, brand, and perceived stability in markets. Self-serving reasoning appears to play a role here; by rejecting bailout conditions, bank executives may aim to preserve their credibility and control, viewing the restrictions as harmful to their strategic interests. Their decision could also be motivated by a desire to avoid the stigma associated with government intervention, which might suggest financial weakness to clients and investors. These decisions exemplify self-serving biases, where institutions prioritize perceived long-term benefits—such as maintaining reputation and control—over immediate financial assistance. Thus, their refusal to accept bailout money reflects a strategic choice aimed at protecting self-interest, even when accepting aid might potentially stabilize their operations and prevent wider economic repercussions.

References

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