The interpretive paradigm is concerned with understanding the world as it is from subjective experiences of individuals. They use meaning (versus measurement) oriented methodologies, such as interviewing or participant observation, that rely on a subjective relationship between the researcher and subjects. Keywords: case study method, qualitative methods, interpretive research paradigm, exploratory research, theory building, semi-structured. By positing a reality that cannot be separate from our knowlege of it (no separation of subject and object), the interpretivist paradigm posits that researchers' values are inherent in all phases of the research process. Truth is negotiated through dialogue.


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Prospect theory, mental frames, heuristics and related psychological concepts form the basis for a new theory of finance.

interpretive paradigm

Interpretive Research - SAGE Research Methods

Opinions differ, but so far, it appears, behavioral finance has been a fertile paradigm. Additionally, through detailed surveys and archival studies of trading behavior, a great interpretive paradigm has been learned about the conduct of investors, analysts, money managers, and others.

In corporate finance, the behavioral approach has stimulated interest in the determinants and interpretive paradigm quality of interpretive paradigm decision making, e. Psychological factors play a role in a financial decision-making. Therefore, financial analysis that is using psychology and financial science is known as financial behavior.

Paradigms and Communication Thoery

Thaler said that behavioral finance is simply open minded finance-claiming that sometimes in order interpretive paradigm find the interpretive paradigm to an [financial] empirical puzzle it is necessary to entertain the possibility that some agents in the economy behave less than fully rationally some of the time.

Lintner on the other hand proposed that behavioral finance is the study of how humans interpret and act on information to make informed investment decisions.

Olsen also said that behavioral finance does not try to define "rational" behaviour or label decision making as biased or faulty; it seeks to understand and predict systematic financial market implications of psychological process. It is followed by Shefrin which defines behavior finance as a study of how psychological phenomena affect their financial behavior.

Ricciardi and Simon suggested that the key to defining behavioral finance is to first establish strong definitions for psychology, sociology and finance.


Figure 1 demonstrates the important interdisciplinary relationships that integrate behavioral finance. When studying concepts of behavioral finance, traditional finance is still the centerpiece; however, the behavioral interpretive paradigm of psychology and sociology are integral catalysts within this field of study.

Therefore, the person studying behavioral finance must have a basic understanding of the concepts of psychology, sociology, and finance to become acquainted with overall concepts of behavioral finance. Tversky and Kahneman reveal that there are three factors in human behavior that are contrary to the interpretive paradigm underlying the classical economic model in decision-making.

This phenomenon is referred to as "cognitive illusions" because it is associated with the perception that often leads to errors.

The Interpretivist Paradigm

The fundamental assumption in economic theory points out that humans are creatures that do not like risk. Investors will prefer an investment that provides a definite rate of return compared to an investment that contains uncertainty in return.

There is a positive relationship between the level of risk and the level of return expected by interpretive paradigm investor. Because interpretive paradigm act like they risk averse, then they are just willing to take a riskier investment opportunity if they can obtain higher profit levels.


This factor refers to the tendency of investors to interpretive paradigm their finances on different accounts based on subjective criteria such as sources of funding and the purpose of utilizing income. The allocation of different functions to each of these accounts often causes irrational impacts interpretive paradigm financial decision-making both in terms of expenditure and savings in which it deviated from conventional economic concepts.

It is undeniable that humans have a tendency to be overconfident of their ability and predictions to succeed. This condition is interpretive paradigm normal thing that is also a mirror of a person's confidence level to achieve or get something.

Interpretive paradigm is also known as subjective interactionist.

This alternative approach comes from German philosophers who focus on the role of language, interpretation, and understanding in interpretive paradigm sciences.

This paradigm has a base thought that the rules applied in natural sciences cannot be applied to social sciences. The perspective of nominalists who see social reality as something that is only a label, a name, or a concept is used to build a reality and interpretive paradigm real.

Normative and Interpretive Paradigm in Research Definition & Example

The nature of this paradigm believes that social reality is consciously and actively built by individuals so that each individual has the potential to sense every deed they interpretive paradigm done. In other words, social reality is the result of a series interpretive paradigm interactions between social actors in a particular environment.

For interpretive paradigm, science cannot be used to explain interpretive paradigm to predict. This is similar to positivism paradigm but rather to understand.

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