PORTFOLIO MANAGEMENT WITH TRANSACTION COSTS: AN ASYMPTOTIC ANALYSIS OF THE MORTON AND PLISKA MODEL

We examine the Morton and Pliska (1993) model for the optimal management of a portfolio when there are transaction costs proportional to a fixed fraction of the portfolio value. We analyze this model in the realistic case of small transaction costs by conducting a perturbation analysis about the no-transaction-cost solution. Although the full problem is a free-boundary diffusion problem in as many dimensions as there are assets in the portfolio, we find explicit solutions for the optimal trading policy in this limit. This makes the solution for a realistically large number of assets a practical possibility.     

Good green mothers consuming their way through pregnancy: roles of environmental identities and information seeking in coping with the transition

We explore the consumption experiences of women who opt for an environmentally conscious approach to pregnancy. Our findings reveal that environmentally conscious mothers conduct extensive scientific research about the products that they purchase during pregnancy and the associated risks of using such products. They believe that their efforts to find and process such information make them experts on what is best for their babies’ health and proclaim some micromanaging powers in an uncontrollable environment. Alas, consumption decisions are simultaneously coupled with tensions between (1) needing to make informed choices and being overwhelmed with information; (2) feeling confident about seeking consumption information and lacking the confidence to share it; and (3) pursuing external expertise and resorting to internal instincts. Thus, although consumption is often perceived as a helpful coping mechanism when transitioning to new life roles, we find that it also contributes to the complexity of such transitional situations.     

Effect of emotional victim images in prosocial advertising: The moderating role of helping mode

Charities and marketers routinely incorporate images of recipients, for example victims of a flood or famine, in their prosocial advertising; however, previous literature suggests mixed results regarding the effectiveness of relying on sad versus happy images of victims. Recently, due to reactance to excessively traumatic marketing campaigns, happy victim images have been found to be more effective in eliciting prosocial behaviors. To extend this line of research, an experiment found that consumers are more willing to help when viewing advertisements featuring happy children over sad children. Moreover, helping mode moderates the relationship between victim image and helping intentions. The effect of a happy victim image is attenuated when consumers are asked to buy cause-related products rather than donate to charities. According to emotion regulation consumption theory, consumers mitigate the feeling of negative emotions by increasing their intention to buy cause-related products. Practically, the findings provide guidance on integrating victim images in prosocial advertising.     

Instrumentalism and Economic Policy: The Quest for Reasonable Value

Neuroeconomics and behavioral economics (NEBE) is one of the most dynamic fields in contemporary economics. However, from the viewpoint of economic methodology there are still substantial reasons why NEBE is irrelevant for economic theory. This paper argues that they will only become an essential part of economics if they are embedded into a fully-fledged institutional and evolutionary paradigm. I develop a Neo-Veblenian theory of the individual that starts out from the observation that modern brain sciences do not support the notion of the brain to be an integrated and consistent rational decision apparatus. An evolutionary explanation is offered for this, which reinstates Veblen's distinction between adaptation as engineering optima and social selection. Individual identity does only emerge through communication and interaction among brains, in particular via language. The concept of the "extended brain" is proposed, which is applied to define human individuality as a social phenomenon. Thus, the systematic unity of neuroeconomics and institutional economics is established.     

Some Implications of Changing the Tax Basis for Pension Funds

Governments in many developed economies provide private pension plans with significant taxation incentives. However, as many retirement income systems are now being reviewed due to demographic, social and economic pressures, these taxation arrangements are also under scrutiny. This paper discusses some of the implications of the differences between the traditional taxation treatment adopted by most OECD nations and that adopted by Australia, where there is a tax on contributions, a tax on investment earnings and a tax on benefits. The results show that there are significant differences in the net value of the benefits received by individuals and the taxation revenue received by the government. On the other hand, it is shown that there is remarkably little to distinguish between the two tax structures in terms of summary measures of lifetime income, although the form in which the benefit is taken in retirement is significant in influencing intragenerational equity.     

Do Female Mutual Fund Managers Manage Differently?

We examine the performance and investment behavior of female fixed‐income mutual fund managers compared with male fixed‐income mutual fund managers. We find that male‐ and female‐managed funds do not differ significantly in terms of performance, risk, and other fund characteristics. Our results suggest that differences in investment behavior often attributed to gender may be related to investment knowledge and wealth constraints. Despite the similarities between male and female managers, we find evidence that gender influences the decision making of mutual fund investors. We find that the net asset flows into funds managed by females are lower than for males, especially for the manager's initial year managing the fund.