#USIUAFRICA

Organizations and Organizational Behavior

MGT 4020

SHAIKH, MOHAMMED AAWEZ – 661961

MWONGELI, YVONNE PEACE – 656888
2023
GRACE MUGENDA 659295
JANAK PATEL GROUP 7
01

#BusinessManagement
EQUITY PREMIUM PUZZLE

What is the “equity premium puzzle”? Can Question 1

you give a personal example?
The "equity premium puzzle" refers to the empirical
observation that over the long-term, stocks (equities) have
historically earned a higher average return than
government bonds, yet the gap between these returns is
much larger than can be easily explained by standard
economic theory.

The puzzle is that, according to economic theory, investors

should require a higher expected return on stocks to
compensate for their higher risk compared to bonds.
However, the historical difference in returns between the
two assets is much larger than what would be expected
based on the difference in their risk levels.
 #MTG4020
One possible explanation for the equity premium puzzle is

that investors are more risk-averse than standard

economic models assume, and therefore require a larger

premium to invest in risky assets like stocks. Another

explanation is that there may be other factors, such as

institutional or behavioural factors, that contribute to the

equity premium.
PERSONAL EXAMPLE
A personal example of the equity premium puzzle might
involve a comparison between the returns on stocks and
bonds in an individual's retirement portfolio over a long
period of time. If an individual had invested in a diversified
portfolio of stocks and bonds over a 30-year period, they
would likely have earned a higher return on their stocks than
their bonds, despite the fact that the stocks were more
volatile and therefore more risky. The size of the difference
between the returns on stocks and bonds might be much
larger than the individual would have expected based on
economic theory, contributing to the equity premium puzzle.
#BusinessManagement
WHY DO YOU SUPPOSE
THAT “WORK ON SELF-
CONTROL PROBLEMS SUCH
AS PROCRASTINATION IS
CATCHING ON MOST
QUICKLY”?

USIU

Question 2 02 Can you provide an example and

explanation of why people do this?
One reason why working on self-control issues like
procrastination is gaining popularity is that
people are becoming more aware of the
detrimental impact these issues may have on
their life. For example, procrastination can
result in missed deadlines, increased stress, and
feelings of guilt or shame.

The advent of digital technology and social media

has made it easy to become side-tracked and
lose concentration on crucial activities. This has
resulted in a greater understanding of the
importance of self-control, as well as the
creation of tools and tactics to assist people in
overcoming procrastination and other self-
control difficulties.
Academic or work-related duties provide an example of why
people work on self-control issues such as procrastination.
Consider a student who has a term paper due in two weeks.
They are aware that they should begin working on it
immediately, but instead they squander their time on social
media and watching television. The student grows
increasingly agitated as the deadline approaches, and may
even feel overwhelmed by the work at hand.

In this case, the student may realize that their procrastination is

causing them unneeded stress and affecting their academic
achievement. They may then decide to work on their self-
control by developing strategies for staying focused and
avoiding distractions, such as setting specific goals and
deadlines, breaking the task down into smaller, more
manageable chunks, and using tools such as apps or time-
management techniques to help them stay on track.
The student may enhance their
academic performance,
lower their stress levels,
and build skills that will
serve them well in other
aspects of their life by
focusing on their self-
control and conquering
their procrastination.
 #BusinessManagement
03
WHY DO YOU THINK IT HAS TAKEN
SO LONG FOR THE “HUMAN FACE”
TO BE WIDELY RECOGNIZED IN
Spring 2023
DECISION-MAKING ANALYSIS AND
PRACTICE? Question 3
 #QUESTION 3
Decision-making can be defined as the cognitive process that results in the
selection of a belief or a course of action from a set of alternatives. In this
report, we will define decision-making and discuss its various aspects in the
context of organizational behavior. So, to begin, let's define decision-making in
general. Decision-making refers to making choices among alternative courses
of action—which may also include inaction.

Here are some reasons why it has taken so long to recognize the “human face” in
decision-making analysis:
SLIDE 11
1. Human decision-making is characterized by bounded rationality, in which people
prioritize their own needs over those of others. Instead of looking for the ideal option,
humans tend to look for choices that will satisfy them. It becomes harder to adopt this
in the organization and hence leaders tend to shy away from this method leading to its
unpopularity.

2. Uncertainty. Due to inadequate data and information, it becomes harder for an

individual to decide. When there is little information accessible, there is uncertainty.
When a decision-maker is unsure of the causes and then the effects of numerous
actions, methods, and alternatives, it becomes exceedingly difficult for him to make
the best choice. When information is incorrect or incomplete, one of the most obvious
information-related issues arises. Trusting faulty information leads to many incorrect
deductions and conclusions. If information is incomplete, even if the decision maker is
aware of it, uncertainty arises, and any decision based on that incomplete information
may prove to be incorrect.
The tendency to seek out or prefer information and opinions that we believe will
confirm our own judgment is known as confirmation bias. We want to be
confirmed, so we pay more attention to information that we believe supports us
and ignore or downplay the importance of information that contradicts us. We
also tend to accept information that confirms our preconceived notions at face
value while being critical and skeptical of information that challenges these
notions. This has in turn affected the use of the method in several organizations.

Some decision-makers prefer to avoid change and keep things as they are. This
desire, which may go unnoticed, frequently leads them to favor ideas that do not
result in significant changes. As a result, evidence and ideas that support change
are overlooked. While looking to maintain the status quo organizations end up
abandoning the “human face” since they cannot see its value.