The disposition effect and investor experience

We examine whether investing experience can dampen the disposition effect, that is, the fact that investors seem to hold on to their losing stocks to a greater extent than they hold on to their winning stocks. To do so, we devise a computer program that simulates the stock market. We use the program in an experiment with two groups of subjects, namely experienced investors and undergraduate students (the inexperienced investors). As a control procedure, we consider random trade decisions made by robot subjects. We find that though both human subjects show the disposition effect, the more experienced investors are less affected.     

Gender differences in occupational mobility – evidence from Portugal

In this paper we evaluate if gender influences the pattern of upward and downward occupational mobility. With data for Portugal in the period 1998–2009, we find that women have a lower probability of upward mobility and a higher probability of downward mobility. The results also reveal the importance of some other determinant factors, especially education and initial occupation. Additionally, considering an analysis in which we group occupations into four ranked categories (low, medium-low, medium-high, and high level occupations), we confirm that the determinants of occupational mobility depend on the ranking of the initial occupation. This analysis allows us to conclude that the unfavorable pattern of occupational mobility in the case of women is due, essentially, to the disadvantage they have at the bottom of the distribution. On the contrary, in the top occupations, the results suggest the existence of equality between genders.     

Renewable resource market obeying difference equations: Stable points,stable cycles,and Chaos (1991)

In this paper, the basic principles of the Chaos Theory are applied to dynamic systems involving renewable resource and harvest. The results of simulations are presented regarding harvested resource stock time path. It is shown that stationary steady-state is only one of many different possible outcomes of bioeconomic equilibrium. The varying impacts that different management policies have on an unstable dynamic system are also studied. It is shown that in unstable resource systems, the effects of some policy measures will be very different from the ones obtained through traditional resource analysis. It also shows that policies which induce a stabilizing effect in stock time series will generally provide greater welfare gains. The results are illustrated by two market examples.     

SOCIAL IDENTITY AND REDISTRIBUTIVE PREFERENCES: A SURVEY

Social identity has become accepted as a key concept underpinning the endogeneity of economic behaviour and preferences. It is important in explaining attitudes towards redistribution and pro‐social behaviour. We examine how economic theory measures social identity and its effects on preferences towards redistribution, social solidarity and redistributive institutions. Empirical evidence indicates that social identity carries weight in explaining the presence of social preferences and attitudes towards redistributive institutions.     

Testing static game theory with dynamic experiments: A case study of public goods

Game theory provides predictions of behavior in many one-shot games. On the other hand, most experimenters usually play repeated games with subjects, to provide experience. To avoid subjects rationally employing strategies that are appropriate for the repeated game, experimenters typically employ a “random strangers” design in which subjects are randomly paired with others in the session. There is some chance that subjects will meet in multiple rounds, but it is claimed that this chance is so small that subjects will behave as if they are in a one-shot environment. We present evidence from public goods experiments that this claim is not always true.     

Forward-premium puzzle: is it time to abandon the usual regression?

The forward premium puzzle is usually evidenced by the rejection of the null hypothesis in the uncovered interest parity (UIP) regression. Because this parity need only hold in a risk-neutral world, a risk adjustment term is missing from the equation if speculation in foreign exchange markets is risky. We deal with this issue following the literature which assumes that discounted returns on foreign government bonds are log-normal, so we can linearize the Euler pricing equations (in level) and obtain a modified UIP system for which the risk adjustment term is obtained by applying to the pricing kernel-based relations a generalized autoregressive conditional heteroscedasticity-in-mean model. However, here we innovate by adopting a methodology which differs from all these related works. We construct and use a stochastic discount factor that does not depend on a specific model, by residing in the space of returns which we extract from the data by simply imposing the orthogonality restrictions represented by the Euler equations. So, we devise a purely statistical pricing kernel that performs well in in-sample level equations. Somewhat disappointingly, the risk premium inclusion in the conventional regression changes neither the significance nor the magnitude of the forecasting power of the forward premium for most currencies we study. The contrasting performance of the tests in level and in logs suggests that linearization may be to blame.     

Health systems futures: The challenges of technology,prevention and insurance

This article argues that the futures of health systems depend on how countries address three wider challenges that include: (a) the adoption of health innovations and quality improvements, (b) responses to new non-communicable and preventable global diseases, as well as (c) adjusting financial models to current insurance constraints. Future trends point towards an increasing dependence on productive quality improvements, the personalisation of health care and the organisation of delivery and finance to take advantage of existing knowledge. Prevention, and disease avoidance, particularly that of non-communicable diseases, will aim to reduce pressure on “care components” of the health system whilst global control of communicable risks will become apparent. Finally, trends suggest an increase in patient participation and personalisation of insurance contracts will help to realign risk sharing with cost containment and financial sustainability. Other potential challenges such as ageing are regarded as second order issues to be addressed through these aforementioned future trends.     

BEHAVIORAL ECONOMICS AND BEHAVIORAL FINANCE: A BIBLIOMETRIC ANALYSIS OF THE SCIENTIFIC FIELDS

The aim of the study is to conduct a bibliometric analysis of the scientific field of Behavioral Economics and Behavioral Finance. The research was conducted using the Web of Science database, which returned 2617 articles, revealing that the amount of research within these fields has grown over time. Furthermore, the results also prove the relevance of the works of Daniel Kahneman and Amos Tversky for the field of Behavioral Economics and Finance, and Steven Hursh to Behavioral Economics. It is still possible to note that the field of Behavioral Economics encompasses subjects that connect human behavior with demand, consumption and price, with investments and with managerial decisions, as well as with the role played by heuristics and cognitive biases in decision‐making processes. In turn, the field of Behavioral Finance is more focused on the study of errors of judgment and of decision‐making characteristics in financial investments. Additionally, it is inferred that the field of Behavioral Economics is more wide‐ranging than the field of Behavioral Finance, as the latter is a byproduct of Behavioral Economics. Finally, a conclusion is then reached, demonstrating that the fields of Behavioral Economics and Finance have turned into an important field of study.     

Panel data modeling of bank deposits

Annals of Finance - Studying the dynamics of deposits is important for three reasons: first, it serves as an important component of liquidity stress testing; second, it is crucial to...