What are the assumptions of traditional finance about people

Traditional finance assumptions about people are as follows:

1, Rational Economic Man assumptions (Rational Economic Man): traditional finance assumes that people are rational economic subjects, they will take full account of maximizing benefits when making decisions, and make decisions based on clear and consistent preferences.

2, Information Symmetry (Information Symmetry): traditional finance usually assumes that market participants have a complete and timely understanding of market information, and information in the market is open, transparent and accessible, there is no information asymmetry.

3. Unlimited Rationality: Traditional finance assumes that people's decision-making process is completely rational and unlimited, and that they can make optimal decisions among all possible choices.

4, Risk Neutrality (Risk Neutrality): traditional finance assumes that people's attitude toward risk is neutral, and they will evaluate and choose investments based on expected returns without considering the impact of risk.

5, independent decision-making assumptions (Independent Decision-making): traditional finance assumes that people's decisions are independent of each other, that is, a person's decision-making will not be affected by other people's decisions or behavior.

The Role of Finance

1, Capital Allocation and Investment Decision-Making: finance provides theories and methods on how to effectively allocate capital and make investment decisions. It examines capital budgeting, investment portfolios, and risk management to help individuals and organizations make informed investment decisions.

2. Capital Markets and Financial Market Operations: Finance studies the mechanisms and operating rules of capital markets and financial markets, including securities trading, stock markets, bond markets, and so on.

3. Risk management and financial stability: finance is devoted to the study of risk management and financial stability. It studies the methods of identifying, evaluating, and managing financial risks, and provides individuals and institutions with strategies for protecting assets and guarding against financial risks.

4. Economic policy making and regulation: Finance plays an important role in economic policy making and financial regulation. It provides an understanding of the functioning of financial markets and economic systems, and provides decision-making and guidance to policy makers and regulators.