Quantitative and qualitative research in finance
◄Previous: 2 Three broad approaches in qualitative research

# 2.1 General assessment of qualitative research

The three different approaches of qualitative research offer a sharp contrast with the positivist ideas underpinning much quantitative work, where the aim is often to produce reliable measurements of controlled variables from which widely generalisable conclusions can be derived or against which theoretical or explanatory hypotheses can be tested.

There is no doubt that in social sciences, in particular in the discipline of economics, quantitative research (and mathematical formalism) enjoys more respect. This reflects the wide-held belief that science has to relate to numbers because only the latter imply precision. Nevertheless, it is important to highlight the fruitfulness and, often, the greater depth of understanding we can derive from qualitative procedures.

Equally important, though, is that these three qualitative orientations are in conflict with one another at various points.

The first treats what people say as a way of seeing into distinctive personal or cultural worlds, perhaps ones that only make sense in their own terms, not in any framework that the researcher initially brings to them. By contrast, the second approach adopts a more critical attitude: the researcher is concerned with the reality that lies behind the fronts that people present, or what they consciously believe, and this may only be detectable by ignoring what they say in order to understand how this betrays an underlying reality and/or by observing what they actually do. Where, in the case of the first approach, we must accept what people say on trust even if initially it does not make much sense to us, expecting that it is in principle possible to understand it as rational, in the second approach we must be suspicious of it even if it apparently makes good sense. Indeed, we should perhaps be especially suspicious in these circumstances, since it may just be a highly effective rationalisation. The third approach is at odds with both of the other two. It denies the existence of, or at least the possibility of accessing, both the ‘subjective realities’ of other people, how they truly see and feel about the world and the well-springs of their actions, and the existence of some objective reality behind the fronts they put up or myths about themselves and others that they believe. Rather, the focus must be on the accounts themselves, how they are constructed, and what functions they may serve.

Despite these sharp contrasts among the three approaches, as we noted earlier, in fact much qualitative research draws on more than one of them. To some extent this arises from the fact that qualitative researchers do not always pay very close attention to the methodological assumptions on which they are operating, but it is also because there are some links between, or overlaps across, these orientations. For example, the kind of analysis developed under the auspices of the third approach can be used for analysing the fronts that are of interest from the point of view of the second. Another way in which more than one of these approaches can be drawn on, despite their incompatibilities, is through their being applied to different individuals, groups, or categories of actor. For instance, the first orientation could be applied to those people with whom the researcher has some sympathy, while the second might be applied to those for whom he or she has little sympathy. Whether or not this is legitimate is a live issue. Furthermore, there is a tendency sometimes for the third orientation to be applied to those accounts that the researcher assumes to be spurious – on the (mistaken) assumption that because an account can be shown to be a construction it is false. Moreover, even the accounts of the same person can be subjected to all three sorts of orientation in a selective way: some parts being viewed as genuine, while others are treated as fronts or as constructed accounts. We should note that none of these strategies for combining the approaches eliminates the tensions entirely, and that there is an absence of clear guidelines as to when one orientation or the other ought to be applied.

## Activity 2

About 90 minutes

This activity discusses a qualitative research project on the common understanding of risk. A detailed description of the research project can be found in the following green paper.

The research was conducted by Sharon Collard, professor of Personal Finance Capability in the True Potential Centre for the Public Understanding of Finance (PUFin). PUFin is a centre for research working to improve public understanding of personal finance established by the Open University Business School. It also delivers free modules providing individuals with the tools to make sound financial decisions. You can find more on the activities of PUFin and offered MOOCs (massive open online courses) on the PUFin website.

Go through the green paper and try to understand the different steps in the planning of the qualitative research project: the motivation, the key questions, the overall research approach, the sample, the structure of questionnaires, and the interviewing process. Then, answer to the following questions:

#### Question 1

What was the motivation of the project?

Add your notes here.

(A text entry box would appear here, but your browser does not support it.)
Provide your answer...

## Discussion

This feedback comes from professor Sharon Collard:

> The motivation really was that we have very good evidence already that consumers in the UK are generally quite unwilling to take risks with their money when it comes to saving and investing and that’s perhaps not very surprising that they don’t really want to take much risk. But we also know that people have a fairly poor understanding of the nature of financial risks and I think it’s that lack of understanding that we find worrying, because people in the UK and in other countries now have to make some really important financial decisions that will affect their financial future so they need to decide where they are going to invest their pension savings for example and perhaps how they’re going to use their pension savings when they come to draw on them later in life. And there are also now in the UK and elsewhere many more opportunities for people to be kind of do-it-yourself investors, in order to choose and to buy investments without taking any professional advice at all. So really with these developments we thought it was a really good time to look at this issue about people’s understanding of risk in a good deal more detail. And also we wanted to look at the subject of risk from the perspective of the financial advice industry and in particular how the industry assesses people’s attitude to risks and the tools that it uses. And the tools that it uses are called risk profiling tools and that might be a term that’s not familiar to people listening and so risk profiling tools really comprise firstly a questionnaire that is administered to a client when they go to see a financial advisor and so the – the financial advisor would give them a questionnaire to complete either at the session or they might go away and complete it at home. And once they’ve completed this questionnaire behind the scenes what happens is there are algorithms so there are mathematical formula that are used to score the client’s answers to the questionnaire and what that does is to calculate a risk profile for the client that the advisor can then use to help select an appropriate saving or investment product or products. So we’re looking at both those things really. It’s both people’s understanding of risk and also how the financial services sector assesses people’s attitude to risk.

#### Question 2

What are the key research questions and how were they investigated? Is this a quantitative or qualitative research?

Add your notes here.

(A text entry box would appear here, but your browser does not support it.)
Provide your answer...

## Discussion

This feedback comes from professor Sharon Collard:

> So we really wanted to address four key questions in the research. The first one was what do people understand by the – by the term ‘risk’ in relation to saving and investing and what are the things that kind of inform that understanding? How have they come about that the understanding that they have?

> The second one is looking at the extent to which risk profiling tools that the financial advice sector uses, how well do they reflect people’s own understanding of risk?

> And the third one is really around whether there’s scope to improve risk-profiling tools to provide a better indicator of people’s attitude to risk. So are there some improvements that we could suggest from our research that would make those tools work a bit better?

> And the final one really is there anything else that could be complementary to the risk profiling tools that would help people to understand their own attitude to risk and that they could really use themselves to help them make good decisions and get good outcomes.

> So in order to answer those research – four – sorry – in order to answer those research questions we have used mainly a qualitative approach to answering them because what qualitative research allows us to do is really get an in-depth understanding of people’s views and experiences through interviews in this case. And what qualitative research is really valuable for is really getting a depth of understanding that you can’t get from a survey where there are mainly closed-ended questions. So it’s really about having a fairly open discussion with participants in order to understand in great detail the topic that you’re interested in. So it was mainly qualitative research that we’ve done but we also conducted a review of the literature and some other evidence that we – we found in relation to the subjects we were interested in and we also conducted some analysis of the attitude to risk questionnaires that are used actually in the financial advice industry to really understand what sorts of questions are asked and how those questions are constructed and those complemented the qualitative interviews that we did.

#### Question 3

What would be the structure of the sample of people that you would interview?

Add your notes here.

(A text entry box would appear here, but your browser does not support it.)
Provide your answer...

## Discussion

This feedback comes from professor Sharon Collard:

> We conducted in-depth interviews with three different groups of people for the research. So the first group was a group that we call stakeholders. So these are people who have an interest in the subject, they were representatives from the UK financial regulator, which is called the Financial Conduct Authority, and we also talked to a number of organisations that represent consumers and advocate for consumers who are particularly interested in financial issues that consumers might face. So that was the first group.

> The second group was people who were actually working in the financial advice industry. They are mainly financial advisors and these are people then who give advice to clients about investments and other regulated financial products and they use day to day in their jobs these risk profiling questionnaires and tools that I talked about earlier. And we also, within that second group of people in the financial advice industry we also spoke to one or two people who actually work on developing risk profiling tools to get their perspective.

> And the third group, the really important group that we spoke to were members of the general public and these were people who had recently taken out or considered taking out an investment because what we really wanted was people who had some recent experience who could talk to us about how they made their decisions to take out that investment.

#### Question 4

With regard to the questionnaires, how would you envisage their structure? What do you believe they should capture?

Add your notes here.

(A text entry box would appear here, but your browser does not support it.)
Provide your answer...

## Discussion

This feedback comes from professor Sharon Collard:

> Because these were full in-depth interviews, we would never use a kind of structured questionnaire for this as you would have perhaps in a survey where a survey would have fixed response codes that people answer. You might have a question and then six responses that you want people to fit their answer into. So this is quite different. This is much more open-ended. It’s much more a discussion and a conversation with people. So for qualitative research and for in-depth interviews in particular what we use are topic guides and topic guides or discussion guides as they’re sometimes called comprise the sorts of main questions and topics that you want to talk to people about. And in this case, because we had three different groups of people that we were talking to we had one topic guide for each of the three groups and they were all slightly different as you might imagine.

> The purpose of a topic guide really, it’s there to make sure that we cover all the main issues so it’s not supposed to be a script. You don’t have to stick to it word for word. And the main job really of the interviewer in using the topic guide is to listen quite carefully to what the respondent is saying and pick up on any cues from the respondent. For example, to ask some follow up questions or to get more details or to get some clarification about what they’re saying. So it’s really there to make sure that we as interviewers as gathering as much information as we possibly can but it’s in an open and fairly unstructured way. And so what that gives you is some discretion to ask follow up questions if you think something is particularly interesting but it’s not necessarily on the topic guides then you know you need some discretion to follow that up because it might be relevant to the research. So in order to be a good interviewer you’ve got to know when it’s appropriate to use that discretion and to know in detail what it is you want to get out of the interview because it’s by listening and probing and asking follow up questions that you really do get the most out of – out of qualitative interviewing.

#### Question 5

The main findings of this research have been published in this white paper.

Active content not displayed. This content requires JavaScript to be enabled, and a recent version of Flash Player to be installed.
Transcript

Listen to the audio, add your own notes and then read the discussion.

(A text entry box would appear here, but your browser does not support it.)
Provide your answer...

## Discussion

A detailed description of the research project can be found in the following green paper.

Go through the paper again and revisit the corresponding parts in the audio discussion. Try to understand the different steps in the planning of the qualitative research: the motivation, the key questions, the overall research approach, the sample, the structure of questionnaires, and the interviewing process. At the time of the interview, this was ongoing research.

◄Contents►Next: 3 Introduction to quantitative research

OpenLearn - Quantitative and qualitative research in finance
Except for third party materials and otherwise, this content is made available under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 Licence, full copyright detail can be found in the acknowledgements section. Please see full copyright statement for details.