QUESTIONS

1. In terms of basic research and applied research how would you categorize Sam’s study? Why?
This study can be categorized as Applied research, as this entire research is focusing on to identifying the effect of personality and emotional reactivity on the financial performance of day traders. So it tries find a solution for a particular problem. 2. Purposiveness, testability, and objectivity are three hallmarks of scientific research. Use Sam’s study as an example to discuss these hallmarks.
Purposiveness: Any scientific research should have a definite and specific purpose. Without a purpose, a search will be a meaning less exercise. It is like sailing in the waters without having a destination. The purpose here is to identify what is the effect of personality and emotional reactivity on the financial performance of day traders. Testability: Scientific research lends itself to testing logically developed hypothesis to see whether or not the data support the educational conjectures or hypothesis that are developed after a careful study of problem situation. Hypothesis here used are:
H1: Extreme (positive and negative) emotional responses to market events have a negative effect on the trading performance of investors.
H2: Successful traders tend to be emotionally stable introverts who are open to new experiences.

Objectivity: The conclusion drawn through the implementation of the results of data analysis should be objective. That is they should be based on the facts of the finding derived from actual data and not on our own subjective or emotional value. Here the conclusion is derived as there is a clear link between emotional reactivity of investors and trading performance.

3. Do you think that the results of Sam’s study are generalizable to other organizations? Why (not)?
This study is lack in generalizability. For the purpose of this study Sam has chosen 50 traders form a training programme. But the question is whether the 50 samples represent the real situation. Therefore, if this research is to be generalized to some other organization or industry then the samples should contain the representatives those of industries.

4. Sam explains to Akrisious that even though he has tried to meet all the hallmarks of scientific investigation, he has not included all the variables that influence the financial performance of traders. Using vocabulary Akrisious has never heard of (such as omitted variable bias and biased and inconsistent parameter estimates) Sam argues that his study may lack rigor and that therefore his study is probably not 100% scientific. a. What is rigor?
Means carefulness, scrupulousness and the degree of exactitude in research investigation. A good theoretical base and around methodological design would add rigor to a purposive study. b. Do you think that despite the apparent lack of rigor, Sam’s efforts have still been worthwhile?
Yes, Rigor is an important characteristics for a successful research. But it not that the only factor which determine the worthiness of the research. Here Sam has applied many frameworks, methodologies in his research. This will help him in achieving the research objective.

5a. Inductive and deductive reasoning are key elements in research. Describe these processes in detail.
Deductive reasoning is considered by many to the be standard for scientific research. Using this method, one begins with theory and hypotheses, then conducts research in order to test whether the theories and hypotheses can be proven true with specific cases. As such, this form of research begins at a general, abstract level, and then works its way down to a more specific and concrete level. With this form of reasoning, if something is found to be true for a category of things, then it is considered true for all things in that category in general.
Inductive reasoning begins with specific observations or real examples in the world, and progresses analytically to broader generalizations and theories based on those observed cases. This is sometimes called a “bottom up” approach, because it starts with specific cases on the ground and works its way up to the abstract level of theory. With this method, once a researcher has identified patterns and trends amongst a set of data, he or she can then formulate some hypotheses to explore, and finally develop some general conclusions or theories. 5b. How does Sam use induction and deduction in his study? Sam has used both deductive and inductive approaches in this research. Zung’s Self-Rating Anxiety Scale and Self-Rating Depression Scale, a public domain version of McCrae and Costa’s NEO IP-R personality inventory instrument, the UWIST Mood Adjective Checklist had been used in his analysis.
At the same time Sam finally came up with a conclusion which states that there is a relationship between emotional reactivity of investors and trading performance. Which could be used in other studies as a parameter or input.

6. Explain the steps in hypothetico-Deductive research using Sam’s study as an example. i. Identify a broad problem area: This research area focusing on to identifying the effect of personality characteristics and emotional reactivity on the trading performance of investor. ii. Define the problem statement: What is the effect of personality and emotional reactivity on the financial performance of day traders. iii. Develop hypothesis:
H1: Extreme (positive and negative) emotional responses to market events have a negative effect on the trading performance of investors.
H2: Successful traders tend to be emotionally stable introverts who are open to new experiences. iv. Determine measures: Questionnaires had been used to get the inputs from the samples chosen. v. Data collection: Sam recruited 50 volunteers from a six-week training program for day-traders offered by Rose Bush, a well-known professional futures trader. Questionnaires were filled by day-traders on the beginning and the end of training programme. vi. Data analysis: Following scales used by Sam to operationalize the variables in his model: Zung’s Self-Rating Anxiety Scale and Self-Rating Depression Scale, a public domain version of McCrae and Costa’s NEO IP-R personality inventory instrument, the UWIST Mood Adjective Checklist, and the total profit/loss on paper trades for the day. vii. Interpretation of data: Results indicate that there is a clear link between emotional reactivity of investors and trading performance.