Behavioral Economics Commons^™

Finance And Fear: Sentiment, Media, And Financial Markets During The Covid-19 Pandemic, Alison N. Sommers

Honors Theses

This thesis aims to build on existing research of market psychology and the effect of sentiment on financial markets. The main objective of this study is to determine the ability of investors to make rational decisions during the most recent period of high sentiment. The anomalies that have occurred in the stock market can be better understood by market psychology which focuses on the biases and social factors that influence investors. The media is a newly relevant factor impacting the volume of sentiment present in the market. A review of literature reveals that many studies of sentiment and financial market’s …

Recessionary Effects On Transfer Fees In European Professional Football, Pierce Snyder

Honors Theses

Association football, most commonly referred to internationally as football, is the world’s most popular sport with billions of fans. Professional football leagues operate in countries all over the globe. While other continents have prominent and successful teams, Europe is the sport’s summit for the club level of competition. Europe boasts the best five leagues in the world, commonly referred to as “the big five”: the Bundesliga (Germany), La Liga (Spain), Ligue 1 (France), Premier League (England), and Serie A (Italy). In the 2016-2017 season, these five leagues accounted for 12.6 billion pounds—57.5 percent—of European football’s revenues of about 21.9 billion …

Testing The Relationship Between Confidence And Effort: A Behavioral Finance Perspective On The Problem Of Financial Literacy, Louie Bernard A. Jacob, Miguel Angelo S. Rabago, Hans Erickson A. Tan, Lawrence B. Dacuycuy, Gerardo L. Largoza, Maria Fe Carmen L. Dabbay

Angelo King Institute for Economic and Business Studies (AKI)

This experimental study tested the relationship between confidence and effort with the ultimate objective of discovering how these factors may influence financial literacy. This was done through a modified version of a slider test and ball allocation task. The population consisted of 85 random participants who were primarily approached through social media. A simple OLS regression, along with robustness checks, namely the Tobit model and instrumental variable (IV) regression model using Tobit estimators, were utilized to confirm the causal relationship between confidence and effort.

The Effect Of Female Managers On Mutual Fund Performance During Down Markets, Madison Gates, Madison I. Gates

Scripps Senior Theses

Women in the finance industry have long been underrepresented. The mutual fund industry is no exception, with female managers in the United States falling stagnant at only 11% from 2000 to 2019. Given this low and stagnant number, this study seeks to understand if female managers impact mutual fund performance, specifically comparing down and up market periods. The data for this research was compiled from individual US mutual fund prospectus and fact sheet information in order to create a unique dataset containing the returns for every year between 2000 and 2019 as well as gender make-up, average experience, and team …

Examination Of Institutional Investment In The United States Of America From 1999 To 2018, Martin R. Lefebvre

Electronic Thesis and Dissertation Repository

This thesis examines the evolution of spatial preference of institutional investors located in the United States of America for the time period of 1999 to 2018 using a mix of exploratory data analysis techniques and more sophisticated space-time and machine learning techniques such as ESRI Space-Time cube and Latent Dirichlet Allocation topic modeling. This thesis concludes that despite having the appearance of a footloose industry due to almost negligible fixed costs, institutional investors are attracted to highly dynamic urban centres and on the 20 year time horizon, appear surprisingly sticky in their location preference. This is consistent with the belief …

Investor Behavior In The Midst Of A Global Pandemic, Abigail N. Bates

Honors Projects

Investors partaking in portfolio and asset management through the stock market and other avenues do so with certain reasoning and methods in hand. Each investor may have different interests and risk tolerances that guide their choices for investment. Behavioral finance allows for an in-depth look at an investor’s actions and the influencing psychology behind it. Before this approach was popularized, early studies of finance assumed that investors were always rational in their decision making and put resources only into opportunities that would increase their utility or happiness. The behavioral finance approach takes a more comprehensive look at these behaviors and …

Bubbles & Bought-Ins: Reevaluating Price Movements In The Art Market, Silas Wuerth

Honors Projects

Employs two tests for bubbles in the art market. First, a right-hand forward recursive augmented Dickey-Fuller test to identify explosive price movements. Second, a test for the statistical significance of hedonic regression price index coefficients after controlling for equity market performance. Finds strong evidence for a speculative bubble in the pre-Great Recession "Post-War & Contemporary" market. Evidence for this bubble diminishes but does not dissipate after accounting for the effect of failed sales on index returns.

How Gender Norms Impact Women's Access To Financial Inclusion, Caitlyn Goodman

Economics Undergraduate Honors Theses

The purpose of this paper is to determine if there is a relationship between gender norms and women's access to financial resources. Using data from the World Bank and the World Values Survey, I use a linear regression model to assess how attitudes toward education, jobs, and over-all equal rights impact women's account ownership.

Financial Management Issues Of College-Aged Students: Influences And Consequences, Katharine N. Widener

Selected Honors Theses

College students have acquired a reputation of irresponsibility and impulsivity, which has contributed to the perception that they are poor managers of money. This researcher sought to establish a clearer picture of the full story behind how college students handle their finances through a comprehensive literature review. Several searches were conducted on the topics of college students, finances, money management, debt levels, and other related terms. Scholarly articles were analyzed for common themes and research patterns, and the various strings of research identified were categorized into three main headings: Financial situation, financial influences, and financial consequences. The three major headings …

Causes And Consequences Of Risk Aversion In Middle Adulthood, Nataliya Rubinchik

Theses and Dissertations

I analyze how risk aversion may affect decision-making over time, what effects risk aversion may have on decisions, and whether one’s level of risk aversion varies over time. I find that risk preferences correlate with certain maternal factors, income, depression, and ethnicity. Risk aversion correlates with financial and health decisions.

Essays On International Risk-Return Trade-Off Relations, Liang Meng

Finance Theses & Dissertations

This dissertation consists of two essays on the international risk-return trade-off relations. The first essay is titled “The Role of the US Market on International Risk-Return Trade-Off Relations” and the second essay is titled “The Role of Investor Sentiment on International Risk-Return Trade-Off Relations”.

In our first essay, we study the intertemporal risk-return trade-off relations based on returns from 18 international markets. Our main contribution is that we find the US market plays an important role affecting the international risk-return trade-off. We present striking new empirical evidence that the inclusion of US market variables significantly changes the estimated risk-return trade-off …

A Two-Sided Auction For Legacy Loans, Peter Cramton

Peter Cramton

On Monday, 23 March 2009, Treasury Secretary Geithner presented the Public-Private Investment Program as a key instrument to resolve the financial crisis (www.financialstability.gov). The Treasury’s description still leaves many issues unanswered. We flesh out the auction design for legacy loans. A two-sided auction is required. Both banks and private investors must compete in a transparent and competitive process.

Financial Stability, Trade Openness And The Structure Of Banks’ Shareholders, Claudiu T. Albulescu

Claudiu T Albulescu

The adverse effect of financial crises upon the world’s economies represented the background for the development of a wide economic literature on financial stability. The assessment of this phenomenon stands for a complex exercise, as many techniques can be used for this purpose. Such a technique is the construction of an aggregate financial stability index which allows for a comparison between financial systems stability. Based on an aggregate index and on a panel of data, we show that, for several Eastern European Countries, the financial stability is largely influenced by the trade openness and by the quality of banks’ shareholders. …

Auctions For Injecting Bank Capital (Addendum To 'A Troubled Asset Reverse Auction'), Peter Cramton, Lawrence M. Ausubel

Peter Cramton

Public discussion has turned, in the past few days, toward using some of the $700 billion in rescue funds for the injection of government money into banks in return for ownership stakes. The purpose of this short note, an addendum to “A Troubled Asset Reverse Auction,” is to describe an auction mechanism suitable for injections of capital into banks. The auctions would price the equity purchases through a competitive process.

A Troubled Asset Reverse Auction, Peter Cramton, Lawrence M. Ausubel

Peter Cramton

The US Treasury has proposed purchasing $700 billion of troubled assets to restore liquidity and solve the current financial crisis, using market mechanisms such as reverse auctions where appropriate. This paper presents a high-level design for a troubled asset reverse auction and discusses the auction design issues. We assume that the key objectives of the auction are to: 1) provide a quick and effective means to purchase troubled assets and increase liquidity; 2) protect the taxpayer by yielding a price for assets related to their value; and 3) offer a transparent rules-based process that minimizes discretion and favoritism. We propose …

Pre-Test Assessment, Thomas D. Berry

Thomas D Berry

An Overview Of Combinatorial Auctions, Peter Cramton, Yoav Shoham, Richard Steinberg

Peter Cramton

No abstract provided.

Combinatorial Auctions, Peter Cramton, Yoav Shoham, Richard Steinberg

Peter Cramton

A comprehensive book on combinatorial auctions―auctions in which bidders can bid on packages of items. The book consists of original material intended for researchers, students, and practitioners of auction design. It includes a foreword by Vernon Smith, an introduction to combinatorial auctions, and twenty-three cross-referenced chapters in five parts. Part I covers mechanisms, such as the Vickrey auction and the ascending proxy auction. Part II is on bidding and efficiency issues. Part III examines computational issues and algorithmic considerations, especially the winner determination problem―how to identify the (tentative) winning set of bids that maximizes revenue. Part IV discusses implementation and …

Closed End Fund Discounts As Sentiment Indicies, Thomas Berry

Thomas D Berry

No abstract provided.

The Disposition Effect And Individual Investor Decisions: The Role Of Regret And Counterfactual Alternatives, Thomas Berry, Suzanne Fogel

Thomas D Berry

Recent studies have documented a strong tendency for individual investors to delay realizing capital losses, while realizing gains prematurely (Odean [1996], Shefrin and Statman [1985], Weber and Camerer [1996]). This tendency has been termed the “disposition effect.” The disposition effect is inconsistent with normative approaches to stock sales, such as those based on tax losses (see, for example, Constantinides [1983]). We surveyed individual investors, and found that more respondents reported regret about holding on to a losing stock too long than about selling a winning stock too soon. This finding suggests that individual investors are consistently engaging in behavior that …

Private Information And Market Movements: New Evidence From The Wednesday Closings Of 1968, Thomas Berry

Thomas D Berry

No abstract provided.

Demand Reduction And Inefficiency In Multi-Unit Auctions, Peter Cramton, Lawrence M. Ausubel

Peter Cramton

Auctions typically involve the sale of many related goods. Treasury, spectrum and electricity auctions are examples. In auctions where bidders pay the market-clearing price for items won, large bidders have an incentive to reduce demand in order to pay less for their winnings. This incentive creates an inefficiency in multiple-item auctions. Large bidders reduce demand for additional items and so sometimes lose to smaller bidders with lower values. We demonstrate this inefficiency in an auction model which allows interdependent values. We also establish that the ranking of the uniform-price and pay-as-bid auctions is ambiguous in both revenue and efficiency terms. …

Auctioning Securities, Peter Cramton, Lawrence M. Ausubel

Peter Cramton

Treasury debt and other divisible securities are traditionally sold in either a pay-your-bid (discriminatory) auction or a uniform-price auction. We compare these auction formats with a Vickrey auction and also with two ascending-bid auctions. The Vickrey auction and the alternative ascending-bid auction (Ausubel 1996) have important theoretical advantages for sellers. In a setting without private information, these auctions achieve the maximal revenue as a unique equilibrium in dominant strategies. In contrast, the pay-your-bid, uniform-price, and standard ascending-bid auction admit a multiplicity of equilibria that yield low revenues for the seller. We show how these results extend to a setting where …

Auctions And Takeovers, Peter Cramton

Peter Cramton

Under Delaware law (the predominant corporate law in the US), when a potential acquirer makes a serious bid for a target, the target's board of directors is required to act as would "auctioneers charged with getting the best price for the stock-holders at a sale of the company." (Revlon v. MacAndrews & Forbes, 173). The target's board may not use defensive tactics that destroy the auction process and must attempt to seek higher bids. Similarly, the Williams Act requires takeover bids to remain open for at least 20 business days on the grounds that the delay facilitates auctions. This preference …

Public Information Arrival, Thomas Berry, Keith Howe

Thomas D Berry

The authors develop a measure of public information flow to financial markets and use it to document the patterns of information arrival, with an emphasis on the intraday flows. The measure is the number of news releases by Reuter's News Service per unit of time. The authors find that public information arrival is nonconstant, displaying seasonalities and distinct intraday patterns. Next they relate their measure of public information to aggregate measures of intraday market activity. The authors' results suggest a positive, moderate relationship between public information and trading volume but an insignificant relationship with price volatility. Copyright 1994 by American …

Relational Investing And Agency Theory, Peter Cramton, Ian Ayres

Peter Cramton

This Article analyzes how, and when, corporate governance could be improved by utilizing "relational investing." The term relational investing is just coming into vogue and there does not yet seem to be a consensus on what it means. Although the term has been trumpeted on the cover of Business Week, before the Conference on Relational Investing at Columbia University, relatively little legal writing had been published on the subject. For the purposes of this Article, we define relational investing to encompass commitments to buy and hold significant blocks of a corporation's stock. And it is particularly important that the relational …

Using Auction Theory To Inform Takeover Regulation, Peter Cramton, Alan Schwartz

Peter Cramton

This paper focuses on certain mechanisms that govern the sale of corporate assets. Under Delaware law, when a potential acquirer makes a serious bid for a target, the target’s Board of Directors is required to act as would "auctioneers charged with getting the best price for the stock-holders at a sale of the company.’’ The Delaware courts’ preference for auctions follows from two premises. First, a firm’s managers should maximize the value of their shareholders’ investment in the company. Second, auctions maximize shareholder returns. The two premises together imply that a target’s board should conduct an auction when at least …

A Multi-State Analysis Of The Tjtc, Thomas Berry, Julia Lane

Thomas D Berry

No abstract provided.

Risk-Return And The Relative Pricing Of Darp, Thomas Berry, John Houston

Thomas D Berry

No abstract provided.

Some Guidelines For Assessing The Size Of Lack-Of-Marketability Discounts, Thomas Berry, Don Shannon

Thomas D Berry

No abstract provided.