On clinical research in finance

Abstract

Finance has begun to utilize clinical approach in its research. The extent of its appropriate use is a serious point for consideration. Any adequate use of a research methodology would highly benefit from a deep understanding of its underlying worldview. This paper, therefore, discusses how worldviews underlie methodologies in general, and those of finance, in particular. It starts with a discussion on how any worldview can be positioned on a continuum formed by four basic paradigms: functionalist, interpretive, radical humanist, and radical structuralist. Next, the paper focuses on methodologies implied by the functionalist and interpretive paradigms, namely: scientific and clinical, respectively. Then, it notes that mainstream finance adheres to the functionalist paradigm. It examines how mainstream functionalist finance intends to use the interpretive clinical approach in its research. While this step towards a more balanced approach to research in finance is appreciated, the paper points out that clinical approach can be appropriately used only if certain fundamental, contextual, paradigmatic assumptions are met.