Drawing on the stewardship and dominion theories, this paper empirically investigates the association between local religious diversity within which firms are headquartered and corporate environmental initiatives. Using a large U.S. sample, we document that firms headquartered in high religiously diverse counties are more involved in corporate environmental initiatives. This positive association remains robust after using a variety of robustness checks. The findings support the hypothesis that local religious diversity is significantly associated with firms’ decisions concerning the environment. This paper contributes to the literature by examining the extent to which the characteristics of society shape firms’ environmental initiatives.
{"title":"Does Religious Diversity Play Roles in Corporate Environmental Decisions?","authors":"Amal Alabbad, Jafar Alsaleem, M. Hassan","doi":"10.2139/ssrn.3908911","DOIUrl":"https://doi.org/10.2139/ssrn.3908911","url":null,"abstract":"Drawing on the stewardship and dominion theories, this paper empirically investigates the association between local religious diversity within which firms are headquartered and corporate environmental initiatives. Using a large U.S. sample, we document that firms headquartered in high religiously diverse counties are more involved in corporate environmental initiatives. This positive association remains robust after using a variety of robustness checks. The findings support the hypothesis that local religious diversity is significantly associated with firms’ decisions concerning the environment. This paper contributes to the literature by examining the extent to which the characteristics of society shape firms’ environmental initiatives.","PeriodicalId":8731,"journal":{"name":"Behavioral & Experimental Finance eJournal","volume":"23 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87685006","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}
Employing representative data from the U.S. Survey of Consumer Payment Choice, we disprove the hypothesis that cryptocurrency investors are motivated by distrust in fiat currencies or regulated finance. Compared with the general population, investors show no differences in their level of security concerns with either cash or commercial banking services. We find that cryptocurrency investors tend to be educated, young and digital natives. In recent years, a gap in ownership of cryptocurrencies across genders has emerged. We examine how investor characteristics vary across cryptocurrencies and show that owners of cryptocurrencies increasingly tend to hold their investment for longer periods.
{"title":"Distrust or Speculation? The Socioeconomic Drivers of U.S. Cryptocurrency Investments","authors":"Raphael A. Auer, David Tercero-Lucas","doi":"10.2139/ssrn.3925319","DOIUrl":"https://doi.org/10.2139/ssrn.3925319","url":null,"abstract":"Employing representative data from the U.S. Survey of Consumer Payment Choice, we disprove the hypothesis that cryptocurrency investors are motivated by distrust in fiat currencies or regulated finance. Compared with the general population, investors show no differences in their level of security concerns with either cash or commercial banking services. We find that cryptocurrency investors tend to be educated, young and digital natives. In recent years, a gap in ownership of cryptocurrencies across genders has emerged. We examine how investor characteristics vary across cryptocurrencies and show that owners of cryptocurrencies increasingly tend to hold their investment for longer periods.","PeriodicalId":8731,"journal":{"name":"Behavioral & Experimental Finance eJournal","volume":"17 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74338294","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}
Investors' expectations on firms' cash flow growth can be biased (e.g. Bordalo et al. (2019)), yet we know little about how these biases and their asset pricing implications vary with forecast horizons. In this paper, I show that extreme expectations at all horizons beyond the current period inversely forecast abnormal stock returns, but some with a delay --- extreme expectations at long-horizons persist until they reach the imminent horizon, causing persistent mispricing. Consistent with managers' expectation management altering the efficient expectation horizon, the pattern is stronger after Regulation-FD. A model based on ``natural expectation'' by Fuster et al. (2010) generates the short- and long-horizon forecast error dynamics that match the empirical patterns. Surprisingly, this extrapolative belief model also predicts underreaction.
{"title":"The Efficient Horizon of Expectation and Stock Prices","authors":"Yingguang Zhang","doi":"10.2139/ssrn.3950009","DOIUrl":"https://doi.org/10.2139/ssrn.3950009","url":null,"abstract":"Investors' expectations on firms' cash flow growth can be biased (e.g. Bordalo et al. (2019)), yet we know little about how these biases and their asset pricing implications vary with forecast horizons. In this paper, I show that extreme expectations at all horizons beyond the current period inversely forecast abnormal stock returns, but some with a delay --- extreme expectations at long-horizons persist until they reach the imminent horizon, causing persistent mispricing. Consistent with managers' expectation management altering the efficient expectation horizon, the pattern is stronger after Regulation-FD. A model based on ``natural expectation'' by Fuster et al. (2010) generates the short- and long-horizon forecast error dynamics that match the empirical patterns. Surprisingly, this extrapolative belief model also predicts underreaction.","PeriodicalId":8731,"journal":{"name":"Behavioral & Experimental Finance eJournal","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-10-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79786364","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}
William J. Bazley, Carina Cuculiza, Kevin Pisciotta
Mindfulness, the meditative process of non-judgmentally focusing on the present, has gained popularity as an accessible and efficacious cognitive behavioral therapy. We experimentally examine whether state mindfulness affects individuals' preferences and financial choices. By shifting attentional focus to the present, mindfulness increases individuals' subjective discount rates. Consequently, state mindfulness causes people to invest less and realize more of their stock gains, which reduces trading performance. Evidence from field data reinforces the experimental findings. Our results highlight that health initiatives can have direct effects on financial decision-making, which is likely to be increasingly relevant as individuals continue to adopt self-help therapeutics.
{"title":"Being Present: The Influence of Mindfulness on Financial Decisions","authors":"William J. Bazley, Carina Cuculiza, Kevin Pisciotta","doi":"10.2139/ssrn.3921871","DOIUrl":"https://doi.org/10.2139/ssrn.3921871","url":null,"abstract":"Mindfulness, the meditative process of non-judgmentally focusing on the present, has gained popularity as an accessible and efficacious cognitive behavioral therapy. We experimentally examine whether state mindfulness affects individuals' preferences and financial choices. By shifting attentional focus to the present, mindfulness increases individuals' subjective discount rates. Consequently, state mindfulness causes people to invest less and realize more of their stock gains, which reduces trading performance. Evidence from field data reinforces the experimental findings. Our results highlight that health initiatives can have direct effects on financial decision-making, which is likely to be increasingly relevant as individuals continue to adopt self-help therapeutics.","PeriodicalId":8731,"journal":{"name":"Behavioral & Experimental Finance eJournal","volume":"17 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-10-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75894410","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}
T. Bao, E. Nekrasova, Tibor Neugebauer, Yohanes E. Riyanto
This chapter surveys the nascent experimental research on the interaction between human and algorithmic (bot) traders in experimental markets. We first discuss studies in which algorithmic traders are in the researcher’s hands. Specifically, the researcher assigns computer agents as traders in the market. We then followed it up by discussing studies in which the researcher allows human traders to decide whether to employ algorithms for trading or to trade by themselves. The paper introduces the types and performances of algorithmic traders that interact with human subjects in the laboratory, including zero-intelligent traders, arbitragers, fundamentalists, adaptive algorithms, and manipulators. We find that whether algorithm traders earn more profit than human traders crucially depends on the asset’s fundamental value process and the market environment. The potential impact of interactions with algorithms on the investor’s psychology is also discussed.
{"title":"Algorithmic Trading in Experimental Markets with Human Traders: A Literature Survey","authors":"T. Bao, E. Nekrasova, Tibor Neugebauer, Yohanes E. Riyanto","doi":"10.2139/ssrn.3908065","DOIUrl":"https://doi.org/10.2139/ssrn.3908065","url":null,"abstract":"This chapter surveys the nascent experimental research on the interaction between human and algorithmic (bot) traders in experimental markets. We first discuss studies in which algorithmic traders are in the researcher’s hands. Specifically, the researcher assigns computer agents as traders in the market. We then followed it up by discussing studies in which the researcher allows human traders to decide whether to employ algorithms for trading or to trade by themselves. The paper introduces the types and performances of algorithmic traders that interact with human subjects in the laboratory, including zero-intelligent traders, arbitragers, fundamentalists, adaptive algorithms, and manipulators. We find that whether algorithm traders earn more profit than human traders crucially depends on the asset’s fundamental value process and the market environment. The potential impact of interactions with algorithms on the investor’s psychology is also discussed.","PeriodicalId":8731,"journal":{"name":"Behavioral & Experimental Finance eJournal","volume":"22 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-10-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76811109","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 examine ballot order effects in the proxy voting process. Our results show that investors and proxy advisors, confronted with repeated decision making across multiple proxy votes, are subject to choice fatigue that affects their voting patterns when electing (independent) corporate directors. Down-the-ballot directors receive considerably less shareholder opposition and are less likely to receive negative recommendations from the proxy advisor, Institutional Shareholder Services. The results show that the ballot order effect is strongest when the voter is less attentive and the ballot items are more complex. Our analysis focuses on a sample where directors are positioned alphabetically on the proxy ballot. This setting allows for a causal interpretation of our results as alphabetical positions are independent of the directors’ ability or position on the board. The results are also robust to firm-level and director-level controls, as well as fixed-effects that control for unobservable time-varying factors related to the firm and voter. Our findings contribute to recent discussion in the media and among regulators about the use of the proxy voting process as an effective mechanism of shareholder voice. If proxy votes and recommendations suffer systematic bias, then recent regulation aimed at transparency might not help to improve the mechanism.
{"title":"When many decisions tire you out: Choice fatigue in proxy voting","authors":"Tanja Artiga González, Paul Calluzzo, G. Granic","doi":"10.2139/ssrn.3944796","DOIUrl":"https://doi.org/10.2139/ssrn.3944796","url":null,"abstract":"We examine ballot order effects in the proxy voting process. Our results show that investors and proxy advisors, confronted with repeated decision making across multiple proxy votes, are subject to choice fatigue that affects their voting patterns when electing (independent) corporate directors. Down-the-ballot directors receive considerably less shareholder opposition and are less likely to receive negative recommendations from the proxy advisor, Institutional Shareholder Services. The results show that the ballot order effect is strongest when the voter is less attentive and the ballot items are more complex. Our analysis focuses on a sample where directors are positioned alphabetically on the proxy ballot. This setting allows for a causal interpretation of our results as alphabetical positions are independent of the directors’ ability or position on the board. The results are also robust to firm-level and director-level controls, as well as fixed-effects that control for unobservable time-varying factors related to the firm and voter. Our findings contribute to recent discussion in the media and among regulators about the use of the proxy voting process as an effective mechanism of shareholder voice. If proxy votes and recommendations suffer systematic bias, then recent regulation aimed at transparency might not help to improve the mechanism.","PeriodicalId":8731,"journal":{"name":"Behavioral & Experimental Finance eJournal","volume":"2 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-10-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"88825832","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 examines the standard static portfolio problem and asset pricing under the Knightian uncertainty or ambiguity. Each investor’s preference is represented by the expected utility with uncertainty probability (EUUP) of Izhakian (2017). First, We show the threshold of an ambiguity-averse (-loving) investor for whether or not she/he invests in uncertain assets is higher (lower) than that of ambiguity-neutral investors. This might give partial solution for “market participating puzzle.” Next, we show conditions under which more ambiguity aversion reduces demand for the uncertain asset. Finally, we derive the state price density (SPD). Applying the empirically estimated parameter values to the derived one, we show the shape of it is not monotone decreasing but bumped. The result shows that EUUP gives another plausible solution for “pricing kernel puzzle.”
{"title":"Portfolio Choices and Asset Prices under EUUP: The Comparative Statics Analysis","authors":"Hideki Iwaki, Y. Osaki","doi":"10.2139/ssrn.3943729","DOIUrl":"https://doi.org/10.2139/ssrn.3943729","url":null,"abstract":"This paper examines the standard static portfolio problem and asset pricing under the Knightian uncertainty or ambiguity. Each investor’s preference is represented by the expected utility with uncertainty probability (EUUP) of Izhakian (2017). First, We show the threshold of an ambiguity-averse (-loving) investor for whether or not she/he invests in uncertain assets is higher (lower) than that of ambiguity-neutral investors. This might give partial solution for “market participating puzzle.” Next, we show conditions under which more ambiguity aversion reduces demand for the uncertain asset. Finally, we derive the state price density (SPD). Applying the empirically estimated parameter values to the derived one, we show the shape of it is not monotone decreasing but bumped. The result shows that EUUP gives another plausible solution for “pricing kernel puzzle.”","PeriodicalId":8731,"journal":{"name":"Behavioral & Experimental Finance eJournal","volume":"14 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-10-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73415635","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}
Using the multiple Emmy Award-winning television game show, Cash Cab, as a pseudo-laboratory, we find that the presence (or addition) of one powerful or influential female in (or to) a small (previously homogeneous male) group significantly reduces the group’s willingness to take qualitatively excessive financial risks. If, however, a group (of at least three persons) consists of one such female, adding more females does not significantly alter the risk-taking behavior of the group. Overall, our results show that an individual’s or a subgroup’s share of power and influence, not just numerical strength, determines whether their tendencies (e.g., relative risk-taking behavior) manifest in collective decisions/outcomes. Our findings have external implications for studies in other settings (e.g., the corporate board).
{"title":"Group Gender Diversity, Individual Power and Influence, and Collective Risk-Taking","authors":"K. Wabara","doi":"10.2139/ssrn.3940001","DOIUrl":"https://doi.org/10.2139/ssrn.3940001","url":null,"abstract":"Using the multiple Emmy Award-winning television game show, Cash Cab, as a pseudo-laboratory, we find that the presence (or addition) of one powerful or influential female in (or to) a small (previously homogeneous male) group significantly reduces the group’s willingness to take qualitatively excessive financial risks. If, however, a group (of at least three persons) consists of one such female, adding more females does not significantly alter the risk-taking behavior of the group. Overall, our results show that an individual’s or a subgroup’s share of power and influence, not just numerical strength, determines whether their tendencies (e.g., relative risk-taking behavior) manifest in collective decisions/outcomes. Our findings have external implications for studies in other settings (e.g., the corporate board).","PeriodicalId":8731,"journal":{"name":"Behavioral & Experimental Finance eJournal","volume":"19 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75165853","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 analyzes return herding at the intraday level in the decentralized cryptocurrency market with its continuous, around the clock trading and dominance of retail investors. We first document substantial herding behavior that is stronger when market returns are positive. Herding is negatively related to both the level and cross-sectional dispersion of investor attention. Moreover, there are pronounced intraday variations: Market return herding exhibits similar patterns as attention and blockchain activity and is strongest during the overlap of hours when traders in major economic centers are likely awake.
{"title":"Intraday Herding and Attention Around the Clock","authors":"Stefan Scharnowski, Yanghua Shi","doi":"10.2139/ssrn.3936733","DOIUrl":"https://doi.org/10.2139/ssrn.3936733","url":null,"abstract":"This paper analyzes return herding at the intraday level in the decentralized cryptocurrency market with its continuous, around the clock trading and dominance of retail investors. We first document substantial herding behavior that is stronger when market returns are positive. Herding is negatively related to both the level and cross-sectional dispersion of investor attention. Moreover, there are pronounced intraday variations: Market return herding exhibits similar patterns as attention and blockchain activity and is strongest during the overlap of hours when traders in major economic centers are likely awake.","PeriodicalId":8731,"journal":{"name":"Behavioral & Experimental Finance eJournal","volume":"2 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-10-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84627957","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 develop a framework for measuring under- and overreaction in expectation formation. The basic insight is that under- and overreaction to new information is identified (up to sign) by the impulse response function of forecast errors. Our measurement procedure yields estimates of under- and overreaction to different shocks at various horizons. In an application to inflation expectations, we find that forecasters underreact to aggregate shocks but overreact to idiosyncratic shocks. We illustrate how our approach can be used to (i) quantify the importance of different biases; (ii) estimate theoretical models; and (iii) shed light on existing empirical approaches and puzzles.
{"title":"Measuring Under- and Overreaction in Expectation Formation","authors":"S. Kucinskas, Florian S. Peters","doi":"10.2139/ssrn.3188065","DOIUrl":"https://doi.org/10.2139/ssrn.3188065","url":null,"abstract":"\u0000 We develop a framework for measuring under- and overreaction in expectation formation. The basic insight is that under- and overreaction to new information is identified (up to sign) by the impulse response function of forecast errors. Our measurement procedure yields estimates of under- and overreaction to different shocks at various horizons. In an application to inflation expectations, we find that forecasters underreact to aggregate shocks but overreact to idiosyncratic shocks. We illustrate how our approach can be used to (i) quantify the importance of different biases; (ii) estimate theoretical models; and (iii) shed light on existing empirical approaches and puzzles.","PeriodicalId":8731,"journal":{"name":"Behavioral & Experimental Finance eJournal","volume":"2 3 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-09-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85408878","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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