Trader Participation in Disclosure: Implications of Interactions with Management

Technological advances are creating a shift in the information disclosure environment allowing more investors to interact with management. We examine three key levels of trader-management interaction to assess the accuracy of traders' market-tested value estimates and resulting market price. These data require an engaging experiment and a complex, contextually rich asset, which we create by playing a popular gaming app before the experiment. Participants view financial information, ask management questions, estimate value, and trade. We find that receiving non-personalized question responses improves trader estimates of value and market price efficiency relative to when traders ask questions but do not expect a response. This occurs because traders exert more effort estimating value and trading. However, receiving personalized versus non-personalized responses harms value estimates and market efficiency. This occurs because traders receiving personalized responses fixate on the interaction with management, dividing their attention and diverting it away from valuing and trading the asset.     

ENGINEERING ECONOMY CASES

This note extends the Initial partial-mean concept for present worth analysis of risk by Buck and Askin (1986) to a two random variable case where the magnitude of a single cash flow Is a random variable, and the time duration is a random variable with uniform distribution. This extension leads to the calculation of the expected magnitude of a project loss given that the loss occurs. Computational formulas and numerical Illustrations are presented.     

Inductive reasoning about unawareness

We develop a model of games with awareness that allows for differential levels of awareness. We show that, for the standard modal-logical interpretations of belief and awareness, a player cannot believe there exist propositions of which he is unaware. Nevertheless, we argue that a boundedly rational individual may regard the possibility that there exist propositions of which she is unaware as being supported by inductive reasoning, based on past experience and consideration of the limited awareness of others. In this paper, we provide a formal representation of inductive reasoning in the context of a dynamic game with differential awareness. We show that, given differential awareness over time and between players, individuals can derive inductive support for propositions expressing their own unawareness. We consider the ecological rationality of heuristics to guide decisions in problems involving differential awareness.     

SAVINGS IN TIMES OF DEMOGRAPHIC CHANGE: LESSONS FROM THE GERMAN EXPERIENCE

Pension reforms in many developed countries make individuals shoulder a bigger share of longevity and income risks. The desired response is that individuals accumulate private assets for retirement. Whether this actually takes place, is of paramount relevance for scientists and policy makers. We take Germany as an example: Twenty years of pension reform have transformed the monolithic German pension system into a multipillar system. Formerly generous public pension benefits are gradually being reduced, whereas substantial incentives are granted to occupational and private saving schemes. Has this transition worked out? We survey the reform steps and households’ reactions: How did individuals adjust their labor market behavior? How did private and occupational pension plans take off? How do behavioral adjustments vary in the population? Most Germans adapted to the new situation. Both actual and expected retirement decisions changed and the share of households without supplementary pensions decreased from 73% to 39% in little more than a decade. This is a remarkable success. Nonetheless, households with low education, low income and less financial education did neither adjust their retirement behavior nor pick up supplementary pension plans and are thus likely to face difficulties in bridging the gap arising in future pension income.     

The relevance of economic issues at the Belgrade conference

Despite or because of the relatively brief concluding document of the Belgrade follow-up meeting mandated to examine the implementation of the Helsinki Final Act, it is worthwhile to review the proposals made in “Basket II“ (economics) and relate them to the two other “Baskets“ (security and “human rights“) in order to understand the process of détente more thoroughly.     

MUTUAL FUND TRADES: ASYMMETRIC LIQUIDITY PREFERENCES AND FUND PERFORMANCE

We investigate the role of the liquidity of stocks traded by mutual funds on the performance of funds experiencing substantial and sustained redemptions (outflows) or inflows. Accordingly, we identify 770 redeeming fund‐periods and 1,757 inflow fund‐periods and find a statistically significant relation between the liquidity of the stocks they trade and the quantity of the stock traded. Notably, when funds experience redemptions, those with low portfolio liquidity have an elevated preference for selling more‐liquid stocks. In the following period, such funds statistically and economically underperform funds that sell less‐liquid stocks. This is consistent with redemptions detrimentally affecting shareholders that remain in a fund.     

Triple acculturation: The role of African Americans in the consumer acculturation of Kenyan immigrants

The role of a subcultural group in the consumer acculturation of Kenyan immigrants is examined. Our findings demonstrate that particular immigrant consumer behaviors are influenced by triple acculturation forces: dominant; subcultural and original culture. We find that immigrants do not arrive in the United States aware of their need to acculturate to a subcultural group. Critical incidents alert the immigrants of the need to acculturate to the African American subculture in order to fulfill some basic consumer goals such as accessing hair care, nightclub entertainment and church services. Progressively, immigrants begin to incorporate triple acculturation forces in their consumer decision making. The immigrants learn to be innovative as well as to engage in satisficing as they navigate the new consumption environment. This research contributes to acculturation studies by extending the models of Berry (Berry JW. Acculturation as varieties of adaptation. In: Padilla AM, editor. Acculturation: theory, model and some new findings, Boulder, CO: Westview Press; 1980. pp. 9-25) as well as Penaloza (Penaloza L. Altravesando Fronteras/Border Crossings: a critical ethnographic exploration of the consumer acculturation of Mexican immigrants. J Consum Res 1994;2:32-54[June]) by incorporating the role of a subcultural group in this process.