Economics Commons^™

No Endowment Effect When People Transact Secondhand Goods Over The Internet, Sergio Da Silva, Raul Matsushita, Eliza Silveira

Sergio Da Silva

We set up a field experiment of the endowment effect by considering thrift shops in Facebook chat rooms and college chat rooms dedicated to secondhand goods transactions. Owners of goods held for use are generally expected to show the endowment effect, but here we show these very owners (most of them females) switch to a trader-like behavior when conducting transactions in the thrift shops and, as a result, the endowment effect vanishes.

Handedness And Digit Ratio Predict Overconfidence In Cognitive And Motor Skill Tasks In A Sample Of Preschoolers, Sergio Da Silva, Bruno Moreira, Newton Da Costa Jr

Sergio Da Silva

In a sample of 141 preschoolers, ages 4 to 6, we find children display overconfidence in cognitive and motor skill tasks, a result that replicates that of adults. Both set of findings suggest the bias may not be learned behavior. Moreover, we find right-handed children to display more overconfidence in the cognitive task, whereas low digit-ratio children show more overconfidence in fine and gross motor skill tasks. Handedness polymorphism has been linked to neurological differences, and in literature low digit ratios are commonly associated with high fetal testosterone.

Some Statistical Properties Of The Mini Flash Crashes, Guilherme Demos, Sergio Da Silva, Raul Matsushita

Sergio Da Silva

We present some properties of the data from the recent mini flash crashes occurring in individual stocks of the Dow Jones Industrial Average. The top five are: 1) Gaussianity is absent in data; 2) the tail decay of the return distributions follow power laws; 3) chaos and logperiodicity cannot be dismissed at first; 4) chaos and logperiodicity are not good models for the data on second thoughts; and 5) a threshold GARCH fit can also describe the data well, but fails to detect the power law tail decay of most distributions of returns.

Anchoring Heuristic Messes With Inflation Targeting, Evelin Da Silva, Sergio Da Silva

Sergio Da Silva

Financial Market Efficiency Should Be Gauged In Relative Rather Than Absolute Terms, Sergio Da Silva

Sergio Da Silva

Economists assess the efficiency of financial markets in absolute, all-or-nothing terms. However, this is at odds with a no-nonsense physics approach. Here, I describe how the relative efficiency of markets can be gauged taking advantage of algorithmic complexity theory. This is not physics-envy because the approach is superior in considering the proper randomness present in complex financial markets.

Time To Abandon Group Thinking In Economics, Sergio Da Silva

Sergio Da Silva

Group thinking is the notion that natural selection favors what is good for the group or the species, not for the individual. Most mainstream evolutionary biology rejects this idea and natural selection is viewed as working on the individual’s genes to promote their own survival and reproduction. Here I show through a couple of examples how group thinking also pervades economics. I argue that the reason for the mistake relies on the fact that economics fails to ground itself in the underlying knowledge provided by biology. Then I suggest how economics can aspire more than being applied logic and turn …

Preschoolers And The Endowment Effect, Sergio Da Silva, Bruno Moreira, Newton Da Costa Jr

Sergio Da Silva

We show that preschoolers exhibit the endowment effect as evidenced by experiments where children generally chose to keep their own toys rather than trading them for similar ones. Furthermore, we relate the emergence of this effect to children’s innate psychobiological traits—emotional state, gender, handedness, and digit ratio. The trials were conducted with 141 children across 6 kindergartens. We also found support that children, like adults, exhibit a preference for physical possession as opposed to ownership. As with adults, emotions also seem to matter, as children who were described as quiet and calm were more likely to present the endowment effect. …

The Mutual Gains From Trade Moderate The Parent-Offspring Conflict, Sergio Da Silva

Sergio Da Silva

This essay asserts that the mutual gains accruing from the exchange of goods between siblings can moderate the famous parent-offspring conflict, an issue of interest in evolutionary biology. The rationale combines basic concepts of economics and behavioral genetics, and fills in the gaps of standard economic theory by justifying why trade, ultimately a cooperative endeavor, is possible from egoistic utility maximizers.

Risk Seekers May Be Antisocial After All, Sergio Da Silva, Raul Matsushita, Luiza Ugarte, Mateus De Carvalho

Sergio Da Silva

Undergraduates were given a battery of psychological tests to gauge their degree of antisocial personality traits (psychopathy, Machiavellianism and nihilism). The students also responded to questionnaires to assess their attitudes toward risk and intertemporal choice. Biological attributes of the respondents were also collected. We found a correlation between psychopathic, Machiavellian and nihilistic traits in the sample, and also that risk seekers were antisocial. Additionally, we found, on average, that younger subjects presented higher levels of psychopathy; atheists were more Machiavellian; and atheists who were anxious tend to be nihilists. Moreover, boys born from younger mothers were more risk seeking than …

2d:4d Digit Ratio Predicts Delay Of Gratification In Preschoolers, Sergio Da Silva, Bruno Moreira, Newton Da Costa Jr

Sergio Da Silva

We replicate the Stanford marshmallow experiment with a sample of 141 preschoolers and find a correlation between lack of self-control and 2D:4D digit ratio. Children with low 2D:4D digit ratio are less likely to delay gratification. Low 2D:4D digit ratio may indicate high fetal testosterone. If this hypothesis is true, our finding means high fetal testosterone children are less likely to delay gratification.

Psychophysiological Correlates Of The Disposition Effect, Marco Goulart, Newton Da Costa Jr, Andre Santos, Emilio Takase, Sergio Da Silva

Sergio Da Silva

We assess the psychophysiological characteristics underlying the disposition effect and find that subjects showing greater disposition effect are those who sweat more and present lower body temperature and heart rate.

A Great Recession In Economics?, Sergio Da Silva

Sergio Da Silva

The number of downloads of economics articles through the repository RePEc showed a sharp drop on the eve of the Great Recession in the economy. This unambiguously occurred with the Blue Ribbon journals, but can possibly be extended to other important journals. If we can perhaps talk of a great recession in economics, in the sense of a general lack of interest in reading economics papers, this may have been part of the overall bearish mood of the time.

Os Erros De Bernoulli, Sergio Da Silva

Sergio Da Silva

No abstract provided.

An Empirical Case Against The Use Of Genetic-Based Learning Classifier Systems As Forecasting Devices, Jaqueson Galimberti, Sergio Da Silva

Sergio Da Silva

We adapt a genetic-based learning classifier system to a forecast evaluation exercise by making its key parameters endogenous and taking into account the need of convergence of the learning algorithm, an issue usually neglected in the literature. Doing so, we find it hard for the algorithm to beat simpler ones based on recursive regressions and on the random walk in forecasting stock returns. We then argue that our results cast doubts on the plausibility of using learning classifier systems to represent agents process of expectations formation, an approach commonly found into the agent-based computational finance literature.

Testing The Equilibrium Exchange Rate Model, Sergio Da Silva, Guilherme Moura

Sergio Da Silva

We find favorable evidence for the textbook equilibrium exchange rate model of Stockman using Blanchard and Quah’s decomposition. Real shocks are shown to account for more than 90 percent of movements in the real exchange rate between Brazil and the United States of America, and for more than half of the nominal exchange rate changes. Impulse response functions also suggest that real shocks alter these countries’ relative prices.

The Canonical Econophysics Approach To The Flash Crash Of May 6, 2010, Joao Mazzeu, Thiago Otuki, Sergio Da Silva

Sergio Da Silva

We carry out a statistical physics analysis of the flash crash of May 6, 2010 using data from the Dow Jones Industrial Average index sampled at a one-minute frequency from September 1, 2009 to May 31, 2010. We evaluate the hypothesis of a non-Gaussian Levy-stable distribution to model the data and pay particular attention to the distribution-tail behavior. We conclude that there is non-Gaussian scaling and thus that the flash crash cannot be considered an anomaly. From the study of tails, we find that the flash crash followed a power-law pattern outside the Levy regime, which was not the inverse …

Overconfidence And Excess Entry: A Comparison Between Students And Managers, A. Felipe Rodrigues, Newton Da Costa Jr, Sergio Da Silva

Sergio Da Silva

Overconfidence can lead to excessive business entry. Here we replicate the pioneer experiment finding this nexus (Camerer and Lovallo 1999) and extend it in two major directions: (1) to consider managers as well as student subjects and (2) to explicitly take into account selected characteristics of the manager subjects. We find that managers are more prone to the nexus overconfidence-excess entry than students are. In particular, we find that left-handed, married, and emotionally aroused managers are more prone to excess entry.

A Log-Periodic Fit For The Flash Crash Of May 6, 2010, Raul Matsushita, Sergio Da Silva

Sergio Da Silva

We show that a two-harmonic log-periodic formula fits the high-frequency data from the Dow Jones Industrial Average index, which encompass the recent episode known as the “flash crash” of May 6, 2010.

Impacts Of China's Growth On The Brazilian Trade, Tatiana Ferrari, Milton Biage, Sergio Da Silva

Sergio Da Silva

We evaluate whether the presence of China in world trade is ultimately beneficial or whether it is a threat to Brazil. Using a gravitational model and a panel data method, we find that the Chinese exports to countries other than Brazil are not hurting the Brazilian exports, although the exports of Brazilian manufactured goods have been displaced by commodities as a result of its commerce with China.

Revisiting Staggered Wages To Consider Discounting, Patricia Bonini, Sergio Da Silva

Sergio Da Silva

In the literature of staggered wages, the discount factor is neglected in the workers’ loss function. Yet, discounting is to be viewed as an extra piece of microfoundation with implications for discretionary monetary policy. We revisit the issue and show that discounting in the model of staggered wages actually lowers the time-consistent steady inflation.

Algorithmic Complexity Theory Detects Decreases In The Relative Efficiency Of Stock Markets In The Aftermath Of The 2008 Financial Crisis, Cleiton Taufemback, Ricardo Giglio, Sergio Da Silva

Sergio Da Silva

The relative efficiency of financial markets can be evaluated using algorithmic complexity theory. Using this approach we detect decreases in efficiency rates of the major stocks listed on the Sao Paulo Stock Exchange in the aftermath of the 2008 financial crisis.

Comment On Casey Mulligan: Keynes In Both Fresh And Salt Water, Sergio Da Silva

Sergio Da Silva

Casey Mulligan suggested in The Economists' Voice that this recession was caused by "something [that] made real wages high and employment low." This coincides with his own view of the causes of the Great Depression. The similarity inevitably brings back General-Theory-Keynes, according to Da Silva, and justifies the suspicion of some salt water economists that Mulligan is blaming both downturns on laziness.

The Future Of Economics Is Scientific, Sergio Da Silva

Sergio Da Silva

No abstract provided.

Biological Characteristics Modulating Investor Overconfidence, Marcia L. Zindel, Emilio Menezes, Raul Matsushita, Sergio Da Silva

Sergio Da Silva

Applying a standard questionnaire (Lichtenstein and Fischhoff 1977) to a sample of 44 professional investors, we sought for explicit correlations between selected biological characteristics of the investors and the cognitive bias known as overconfidence. We found that both male and female investors showed overconfidence above the subjective probability of 0.7 and underconfidence below this threshold. But the sexes seemed to behave differently when they were totally uncertain of their answers. Experienced and inexperienced investors were overconfident whenever they were 70 percent (or above) confident of their answers. Despite that, experienced investors were relatively more calibrated. Of those who were highly …

Efficiency Of Financial Markets And Algorithmic Complexity, Ricardo Giglio, Sergio Da Silva, Iram Gleria, Adhemar Ranciaro, Raul Matsushita, Annibal Figueiredo

Sergio Da Silva

In this work we are interested in the concept of market efficiency and its relationship with the algorithmic complexity theory. We employ a methodology based on the Lempel-Ziv index to analyze the relative efficiency of high-frequency data coming from the Brazilian stock market.

Does Macroeconomics Need Microeconomic Foundations?, Sergio Da Silva

Sergio Da Silva

I argue that it is microeconomics that needs foundations, not macroeconomics. Preferences need to be built on biology, and, in particular, on neuroscience. In contrast, macroeconomics could benefit from rationalizations of aggregate economic phenomena by non-equilibrium statistical physics.

Crisis, Imbalance, And Prospects For The Dollar, Sergio Da Silva

Sergio Da Silva

One positive aspect of the financial crisis was the boost to the dollar. However, global imbalances have put further pressure on the future of American finance.

Bolhas Racionais No Indice Bovespa, Mauricio Nunes, Sergio Da Silva

Sergio Da Silva

We checked for the presence of rational bubbles in the São Paulo Stock Exchange index using both linear and nonlinear cointegration. We detected the presence of explosive and periodically collapsing bubbles, but we could not track intrinsic bubbles.

Ranking The Stocks Listed On Bovespa According To Their Relative Efficiency, Ricardo Giglio, Sergio Da Silva

Sergio Da Silva

A methodology based on the algorithmic complexity theory has been applied to assess the relative efficiency of the stocks listed on Bovespa. We provide eight alternative listings of the top ten stocks according to their efficiency rates.

Going Parochial In The Assessment Of The Brazilian Economics Research Output, Sergio Da Silva

Sergio Da Silva

I evaluate the just launched official criterion for assessing the economics research output in Brazil, called “Qualis”. I compare it with the simple journal impact factors released by RePEc. Four biases are identified: (1) left-wing journals have been favored, (2) mainstream British journals have been downgraded, (3) cross disciplinary research output has been neglected, and (4) domestic journals have been favored.

Reactions to this paper

F. S. Lee, B. C. Cronin, S. McConnel, E. Dean (2010) Research quality rankings of heterodox economic journal in a contested discipline, American Journal of Economics and Sociology 69(5), 1409-1452

J. R. Faria (2010) Most …