Sumit Agarwal, Gene Amromin, Itzhak Ben-David, S. Chomsisengphet, Douglas D. Evanoff
In this chapter we review the literature on financial counseling, financial literacy, and consumer decision making and look at a financial counseling/planning program in India where consumers revealed their risk appetite, future financial goals, and current assets and liabilities. The results from India suggest that a vast majority of the respondents appear to be financially literate – they answer the numeracy, inflation, and diversification questions correctly. The Indian financial literacy level is the same as in Netherlands but 20% higher compared to the USA. Indians use about 38% of monthly income to cover monthly expenses – they save or invest 62% of their salary on average. However, we find that most consumers are ill prepared to meet their goals based on their asset, liabilities and risk profiles. The survey of the literature suggests that financial counseling is an important tool in educating consumers in their decision making.
{"title":"Financial Counseling, Financial Literacy, and Household Decision Making","authors":"Sumit Agarwal, Gene Amromin, Itzhak Ben-David, S. Chomsisengphet, Douglas D. Evanoff","doi":"10.2139/SSRN.1628975","DOIUrl":"https://doi.org/10.2139/SSRN.1628975","url":null,"abstract":"In this chapter we review the literature on financial counseling, financial literacy, and consumer decision making and look at a financial counseling/planning program in India where consumers revealed their risk appetite, future financial goals, and current assets and liabilities. The results from India suggest that a vast majority of the respondents appear to be financially literate – they answer the numeracy, inflation, and diversification questions correctly. The Indian financial literacy level is the same as in Netherlands but 20% higher compared to the USA. Indians use about 38% of monthly income to cover monthly expenses – they save or invest 62% of their salary on average. However, we find that most consumers are ill prepared to meet their goals based on their asset, liabilities and risk profiles. The survey of the literature suggests that financial counseling is an important tool in educating consumers in their decision making.","PeriodicalId":224430,"journal":{"name":"Decision-Making in Economics eJournal","volume":"98 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-11-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130344575","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Raquel Fonseca, Kathleen J. Mullen, Gema Zamarro, Julie M. Zissimopoulos
Using newly collected data from the RAND American Life Panel, we examine potential explanations for the gender gap in financial literacy, including the role of marriage and who within a couple makes the financial decisions. Blinder-Oaxaca decomposition reveals the majority of the gender gap in financial literacy is not explained by differences in the characteristics of men and women-but rather differences in coefficients, or how literacy is produced. We find that financial decision making of couples is not centralized in one spouse although it is sensitive to the relative education level of spouses.
{"title":"What Explains the Gender Gap in Financial Literacy? The Role of Household Decision-Making","authors":"Raquel Fonseca, Kathleen J. Mullen, Gema Zamarro, Julie M. Zissimopoulos","doi":"10.2139/ssrn.1633689","DOIUrl":"https://doi.org/10.2139/ssrn.1633689","url":null,"abstract":"Using newly collected data from the RAND American Life Panel, we examine potential explanations for the gender gap in financial literacy, including the role of marriage and who within a couple makes the financial decisions. Blinder-Oaxaca decomposition reveals the majority of the gender gap in financial literacy is not explained by differences in the characteristics of men and women-but rather differences in coefficients, or how literacy is produced. We find that financial decision making of couples is not centralized in one spouse although it is sensitive to the relative education level of spouses.","PeriodicalId":224430,"journal":{"name":"Decision-Making in Economics eJournal","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128633821","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2008-07-01DOI: 10.5465/AMR.2008.32465698
Michael L. Barnett
Real options reasoning assumes timely and effective managerial decision making yet does not address managers' ability to provide it. An attention-based view describes managerial behavior under varying structural conditions. I examine real options reasoning from an attention-based view. I develop several testable propositions regarding the effects of a firm's particular concrete and contextual attention structures on the ways in which its managers notice, champion, acquire, maintain, exercise, and abandon the various real options within its portfolio. I conclude with implications for future empirical research on real options reasoning.
{"title":"An Attention-Based View of Real Options Reasoning","authors":"Michael L. Barnett","doi":"10.5465/AMR.2008.32465698","DOIUrl":"https://doi.org/10.5465/AMR.2008.32465698","url":null,"abstract":"Real options reasoning assumes timely and effective managerial decision making yet does not address managers' ability to provide it. An attention-based view describes managerial behavior under varying structural conditions. I examine real options reasoning from an attention-based view. I develop several testable propositions regarding the effects of a firm's particular concrete and contextual attention structures on the ways in which its managers notice, champion, acquire, maintain, exercise, and abandon the various real options within its portfolio. I conclude with implications for future empirical research on real options reasoning.","PeriodicalId":224430,"journal":{"name":"Decision-Making in Economics eJournal","volume":"21 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133299002","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2007-05-18DOI: 10.1108/17439130710721680
L. Coleman
Purpose - When finance managers face decisions, they do not always make clinical evaluations using rational methodology, but systematically depart from utility maximisation. This article addresses biases that are related to risk propensity, and categorises them under five headings: decision makers' characteristics and perception; reference levels; mental accounting and the assumption of mean reversion; the longshot bias or overconfidence; and the desire for immediate gratification. The research reported in the paper seeks to understand the mechanisms of these biases using a study of decision making by Australian finance executives in a setting that is representative of a typical business decision. Design/methodology/approach - This paper uses a case study that was designed to identify why decision makers facing choices will prefer a risky alternative. Data were collected using e-mail contact and an electronic survey. Respondents ( Findings - Just over half the executives proved willing to take a risk, and almost half the variance in their risk propensity was explained roughly equally by respondents': endowment, perception of risk's role in decisions, assessment of alternative choices, and expectation of the decision's outcome. Manipulation of the cases along four dimensions varied the decision's facts, but they proved only marginally significant to risk taking. Originality/value - The study provides a practical explanation of the risk taking behaviour of finance executives; confirms that context is more important to decisions than their content; and adds to the growing body of applied behavioural research in finance.
{"title":"Risk and Decision Making By Finance Executives: A Survey Study","authors":"L. Coleman","doi":"10.1108/17439130710721680","DOIUrl":"https://doi.org/10.1108/17439130710721680","url":null,"abstract":"Purpose - When finance managers face decisions, they do not always make clinical evaluations using rational methodology, but systematically depart from utility maximisation. This article addresses biases that are related to risk propensity, and categorises them under five headings: decision makers' characteristics and perception; reference levels; mental accounting and the assumption of mean reversion; the longshot bias or overconfidence; and the desire for immediate gratification. The research reported in the paper seeks to understand the mechanisms of these biases using a study of decision making by Australian finance executives in a setting that is representative of a typical business decision. Design/methodology/approach - This paper uses a case study that was designed to identify why decision makers facing choices will prefer a risky alternative. Data were collected using e-mail contact and an electronic survey. Respondents ( Findings - Just over half the executives proved willing to take a risk, and almost half the variance in their risk propensity was explained roughly equally by respondents': endowment, perception of risk's role in decisions, assessment of alternative choices, and expectation of the decision's outcome. Manipulation of the cases along four dimensions varied the decision's facts, but they proved only marginally significant to risk taking. Originality/value - The study provides a practical explanation of the risk taking behaviour of finance executives; confirms that context is more important to decisions than their content; and adds to the growing body of applied behavioural research in finance.","PeriodicalId":224430,"journal":{"name":"Decision-Making in Economics eJournal","volume":"196 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2007-05-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124361742","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper estimates the degree of the exponential-function misvaluation, its variation with given product price level, and its expected growth rate. The paper examines whether other mathematical functions, such as linear, quadratic and cubic functions, conform to the discounting and compounding processes of individual decision makers. Using subjects familiar with the exponential function discounting formula, this study finds that individuals undervalue the compound interest discounting formula given by the exponential function and overvalue the simple interest discounting formula given by the linear function. These findings can be attributed to the overreaction, overconfidence, mental accounting and narrow-framing behaviors discussed in psychology.
{"title":"How Good is the Exponential Function Discounting Formula?: An Experimental Study","authors":"U. Ben-Zion, Yochanan Shachmurove, Joseph Yagil","doi":"10.2139/ssrn.418581","DOIUrl":"https://doi.org/10.2139/ssrn.418581","url":null,"abstract":"This paper estimates the degree of the exponential-function misvaluation, its variation with given product price level, and its expected growth rate. The paper examines whether other mathematical functions, such as linear, quadratic and cubic functions, conform to the discounting and compounding processes of individual decision makers. Using subjects familiar with the exponential function discounting formula, this study finds that individuals undervalue the compound interest discounting formula given by the exponential function and overvalue the simple interest discounting formula given by the linear function. These findings can be attributed to the overreaction, overconfidence, mental accounting and narrow-framing behaviors discussed in psychology.","PeriodicalId":224430,"journal":{"name":"Decision-Making in Economics eJournal","volume":"120 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2003-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129017024","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Presentation Slides for "Overconfidence, Arbitrage, and Equilibrium Asset Pricing" This paper offers a model in which asset prices reflect both covariance risk and misperceptions of firmsapos prospects, and in which arbitrageurs trade against mispricing. In equilibrium, expected returns are linearly related to both risk and mispricing measures (e.g., fundamental/price ratios). With many securities, mispricing of idiosyncratic value components diminishes but systematic mispricing does not. The theory offers untested empirical implications about volume, volatility, fundamental/price ratios, and mean returns, and is consistent with several empirical findings. These include the ability of fundamental/price ratios and market value to forecast returns, and the domination of beta by these variables in some studies. Paper can be found here: https://ssrn.com/abstract=1288932.
{"title":"(Presentation Slides) Investor Overconfidence, Covariance Risk, and Predictors of Securities Returns","authors":"Kent Daniel, D. Hirshleifer, A. Subrahmanyam","doi":"10.2139/ssrn.3181620","DOIUrl":"https://doi.org/10.2139/ssrn.3181620","url":null,"abstract":"Presentation Slides for \"Overconfidence, Arbitrage, and Equilibrium Asset Pricing\" This paper offers a model in which asset prices reflect both covariance risk and misperceptions of firmsapos prospects, and in which arbitrageurs trade against mispricing. In equilibrium, expected returns are linearly related to both risk and mispricing measures (e.g., fundamental/price ratios). With many securities, mispricing of idiosyncratic value components diminishes but systematic mispricing does not. The theory offers untested empirical implications about volume, volatility, fundamental/price ratios, and mean returns, and is consistent with several empirical findings. These include the ability of fundamental/price ratios and market value to forecast returns, and the domination of beta by these variables in some studies. \u0000Paper can be found here: https://ssrn.com/abstract=1288932.","PeriodicalId":224430,"journal":{"name":"Decision-Making in Economics eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1998-09-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114150360","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We show that it is beneficial for a buyer to conduct a multi-stage mechanism if bidders are loss averse. In a first step, we derive a revenue equivalence principle. Fixing the multi-stage structure, the revenue is independent of the chosen payment rule. Secondly, we introduce a simple two-stage mechanism which always leads to a decrease in procurement costs compared to any single-stage auction. Finally we derive the optimal efficient two-stage mechanism.
{"title":"Procurement Design with Loss Averse Bidders","authors":"Nicolas Fugger, P. Gillen, Tobias Riehm","doi":"10.2139/ssrn.3526014","DOIUrl":"https://doi.org/10.2139/ssrn.3526014","url":null,"abstract":"We show that it is beneficial for a buyer to conduct a multi-stage mechanism if bidders are loss averse. In a first step, we derive a revenue equivalence principle. Fixing the multi-stage structure, the revenue is independent of the chosen payment rule. Secondly, we introduce a simple two-stage mechanism which always leads to a decrease in procurement costs compared to any single-stage auction. Finally we derive the optimal efficient two-stage mechanism.","PeriodicalId":224430,"journal":{"name":"Decision-Making in Economics eJournal","volume":"29 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114275667","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This research aims to identify and measure the influence of factors affecting customers’ loyalty for gym service at K.I.M Center by surveying 640 customers using the gym service at K.I.M Center. Cronbach's alpha, EFA, CFA and SEM analysis were used in the study. The results of the model tested with SEM supported 11 hypotheses out of a total of 12 hypotheses. The four factors are (i) Habits, (ii) Conversion cost, (iii) Relationship Marketing, and (iv) Satisfaction towards customers’ loyalty at the center. Two factors (i) Intangible quality, (ii) Tangible quality have an impact on customers’ satisfaction. In addition, other relationships in the model are also verified (1) the impact of relationship marketing on tangible and intangible quality, (2) the impact of tangible and intangible quality on the habit; (3) and the impact of tangible quality on customers’ conversion cost. In it, the factor of Satisfaction expressed through tangible and intangible quality has the strongest impact on customers’ loyalty. Keywords: Loyalty, Affecting factor, Gym service, K.I.M. Center.
{"title":"Study of the Factors Affecting Customers' Loyalty for Gym Service at K.I.M Center, Vietnam","authors":"Giao Ha Nam Khanh","doi":"10.31219/osf.io/57g8a","DOIUrl":"https://doi.org/10.31219/osf.io/57g8a","url":null,"abstract":"This research aims to identify and measure the influence of factors affecting customers’ loyalty for gym service at K.I.M Center by surveying 640 customers using the gym service at K.I.M Center. Cronbach's alpha, EFA, CFA and SEM analysis were used in the study. The results of the model tested with SEM supported 11 hypotheses out of a total of 12 hypotheses. The four factors are (i) Habits, (ii) Conversion cost, (iii) Relationship Marketing, and (iv) Satisfaction towards customers’ loyalty at the center. Two factors (i) Intangible quality, (ii) Tangible quality have an impact on customers’ satisfaction. In addition, other relationships in the model are also verified (1) the impact of relationship marketing on tangible and intangible quality, (2) the impact of tangible and intangible quality on the habit; (3) and the impact of tangible quality on customers’ conversion cost. In it, the factor of Satisfaction expressed through tangible and intangible quality has the strongest impact on customers’ loyalty. Keywords: Loyalty, Affecting factor, Gym service, K.I.M. Center.","PeriodicalId":224430,"journal":{"name":"Decision-Making in Economics eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130020913","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article investigate the performance persistence of 736 hedge funds monthly observations of nine style categories, as they include the largest number of hedge funds measured from 1990 to 2003. The sample is free from survivorship bias as it includes funds that has terminated, merged or unitized. The whole sample consists of 773 hedge funds. We measure performance using risk adjusted measures. High values of the Treynor, Sharpe and information ratio are an indication of a skillful manager that adds value in terms of better performance persistence of the funds under each style category. In contrast, low values of the Treynor, Sharpe and information ratio are an indication of a manager that shows low performance and no value in terms of stock picking ability. The results in term of Treynor, Sharpe and information ratio are mixed. There is mixed evidence of long-term performance persistence. All style categories display positive figures in terms of the share average returns. Positive returns indicate that the manager is skillful in terms of share picking ability.
{"title":"Hedge Funds Performance Persistence","authors":"Michel Guirguis","doi":"10.2139/ssrn.3868891","DOIUrl":"https://doi.org/10.2139/ssrn.3868891","url":null,"abstract":"This article investigate the performance persistence of 736 hedge funds monthly observations of nine style categories, as they include the largest number of hedge funds measured from 1990 to 2003. The sample is free from survivorship bias as it includes funds that has terminated, merged or unitized. The whole sample consists of 773 hedge funds. We measure performance using risk adjusted measures. High values of the Treynor, Sharpe and information ratio are an indication of a skillful manager that adds value in terms of better performance persistence of the funds under each style category. In contrast, low values of the Treynor, Sharpe and information ratio are an indication of a manager that shows low performance and no value in terms of stock picking ability. The results in term of Treynor, Sharpe and information ratio are mixed. There is mixed evidence of long-term performance persistence. All style categories display positive figures in terms of the share average returns. Positive returns indicate that the manager is skillful in terms of share picking ability.","PeriodicalId":224430,"journal":{"name":"Decision-Making in Economics eJournal","volume":"53 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131335033","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The non-substitution theorem was first demonstrated by Samuelson and Georgescu-Roegen for a generalized model of Leontief. The theorem raised the question to know if the “deep-seated causes of [economic] development are to be found in the variations of the basic structural relationships themselves_ that is in modification of changes in consumers’ tastes_ and changes in the structure of productive processes” (Leontief). Without advanced empirical evidence, this episode brought at the core of linear economics the substitution principle and consider Leontief’s assumption of non-substitutions among production factors as simplistic and unsatisfactory. This can be viewed as an anomaly for the philosophy of science: a change in a research program without empirical anomalies but only a certain epistemological and theoretical context.
{"title":"Leontief and Samuelson on the Non-Substitution Theorem","authors":"Amanar Akhabbar","doi":"10.2139/ssrn.3792039","DOIUrl":"https://doi.org/10.2139/ssrn.3792039","url":null,"abstract":"The non-substitution theorem was first demonstrated by Samuelson and Georgescu-Roegen for a generalized model of Leontief. The theorem raised the question to know if the “deep-seated causes of [economic] development are to be found in the variations of the basic structural relationships themselves_ that is in modification of changes in consumers’ tastes_ and changes in the structure of productive processes” (Leontief). Without advanced empirical evidence, this episode brought at the core of linear economics the substitution principle and consider Leontief’s assumption of non-substitutions among production factors as simplistic and unsatisfactory. This can be viewed as an anomaly for the philosophy of science: a change in a research program without empirical anomalies but only a certain epistemological and theoretical context.","PeriodicalId":224430,"journal":{"name":"Decision-Making in Economics eJournal","volume":"34 3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123460625","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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