Pure vs speculative risk: False choice; sham marriage
Michael R. Powers
Purpose – The purpose of this editorial is to study the relationship between the pure risks of insurance and the speculative risks of other financial markets in the context of financial services “convergence”. Design/methodology/approach – The editorial recasts the difference between pure risks and speculative risks as a distinction between empirical risks (which arise from observable natural processes largely insulated against behavioral effects) and market risks (which contain substantial non-empirical or behavioral components). Findings – Using the empirical risk/market risk dichotomy, it is argued that there is little reason to anticipate a dramatic convergence of insurance and other financial markets. Originality/value – The editorial challenges conventional distinctions between insurance and other financial risks, as well as conventional expectations regarding financial services convergence.
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