the fetal origins hypothesis in finance prenatal environment the gender gap and investor behavior we find that differences in individuals prenatal environments explain heterogeneity in financial decisions later in life an exogenous increase in exposure to prenatal testosterone is associated with the masculinization of financial behavior specifically with elevated risk taking and trading in adulthood we also examine birth weight those with higher birth weight are more likely to participate in the stock market whereas those with lower birth weight tend to prefer portfolios with higher volatility and skewness consistent with compensatory behavior our results contribute to the understanding of how the prenatal environment shapes an individual s behavior in financial markets later in life received may 2 2014 accepted september 30 2015 by editor david hirshleifer

portfolio choices of parents and their children as young adults asset accumulation by african american families the portfolio composition decision often is stylized as either a life cycle choice to allocate income to consumption or as a choice along a risk return locus with the locus derived from the underlying market equilibrium of asset returns and prices empirical work on household financial behavior has identified large differences in wealth levels and in portfoliocomposition choices of different demographic groups well beyond income and risk tolerance by far the most striking difference in this literature emerges when the population is subdivided by race for example given the strong performance of the u s equity market in the past decade portfolio choices of stocks have been key to wealth building yet africanamerican families have been less likely to have held stocks as of the mid 1980 s and less likely to have become shareholders over the period 1989 1994 erik hurst et al 1998 this paper attempts to resolve this puzzle by examining cross generational influences on current portfolio composition decisions

gender differences in the allocation of assets in retirement savings plans in 1995 40 percent of working men and 32 percent of working women were covered by a defined contribution dc plan a distinguishing characteristic of these plans is that workers can generally choose how their assets are invested using data from the 1992 and 1995 surveys of consumer finances scf this paper examines whether workers differ systematically by gender in the allocation of assets in dc plans previous researchers have reported that many workers tend to invest their retirement assets too conservatively and in particular that women are less likely than men to invest in risky assets such as stocks in the presence of an equity premium a lower propensity by women to invest in stocks could translate into large differences in the accumulation of financial wealth for retirement we establish that gender differences in investment decisions exist though they are more complicated than previous studies have suggested we show that these differences are not completely explained by differences in individual or household characteristics a few studies have examined gender differences in investment decisions vickie l bajtelsmit and jack l vanderhei 1997 richard p hinz et al 1997 these studies use administrative data and report that women tend to invest their retirement funds in less risky vehicles than men michael haliassos and carol c bertaut 1995 use the 1983 scf to examine why such a large fraction of households do not own any stock they report that gender does not have a significant effect on the probability of owning stock though gender differences are not the focus of their paper what these data sources lack haliassos and bertaut being the exception is a rich set of demographic and other variables on households that theory predicts should affect investment behavior this paper adds to the literature by examining gender differences in investment decisions conditioning on such variables the results highlight the importance of including marital status risk aversion measures and the portfolio of assets held outside dc plans when examining gender differences in investment decisions in these plans

formative experiences and portfolio choice evidence from the finnish great depression we trace the impact of formative experiences on portfolio choice plausibly exogenous variation in workers exposure to a depression allows us to identify the effects and a new estimation approach makes addressing wealth and income effects possible we find that adversely affected workers are less likely to invest in risky assets this result is robust to a number of control variables and it holds for individuals whose income employment and wealth were unaffected the effects travel through social networks individuals whose neighbors and family members experienced adverse circumstances also avoid risky investments

structural estimation of stock market participation costs abstract this paper develops and estimates a dynamic model of stock market participation where consumers decisions regarding stock market participation are influenced by participation costs the practical significance of the participation costs is considered as being a channel through which financial education programs can affect consumers investment decisions using household data from the panel study of income dynamics i estimate the magnitude of the participation cost allowing for individual heterogeneity in it the results show the average stock market participation cost is about 4 6 of labor income however it varies substantially over consumers life the model successfully predicts the level of the observed participation rate and the increasing pattern of stock market participation over the consumers life cycle

side effects of nonlinear profit taxes in an evolutionary market entry model abrupt changes coexisting attractors and hysteresis problems in order to demonstrate that nonlinear tax systems may have surprising and potentially undesirable side effects we develop an evolutionary market entry model in which firms decide on the basis of past profit opportunities whether or not to enter a competitive market our main focus is on the case of a proportional tax on positive profits such a piecewise linear tax scheme induces a kink in the firms profit functions and may lead to abrupt changes in a market s dynamics coexisting attractors and hysteresis problems since these phenomena can also be observed in more general models a proper understanding of their basic mechanism may be helpful to explain the intricate behavior of many economic systems

the origins of intergenerational associations lessons from swedish adoption data we use unique swedish data with information on adopted children s biological and adoptive parents to estimate intergenerational mobility associations in earnings and education we argue that the impact from biological parents captures broad prebirth factors including genes and prenatal environment and the impact from adoptive parents represents broad postbirth factors such as childhood environment we find that both pre and postbirth factors contribute to intergenerational earnings and education transmissions and that prebirth factors are more important for mother s education and less important for father s income we also find some evidence for a positive interaction effect between postbirth environment and prebirth factors

conversation information and herd behavior experimental evidence shows that an important reason why people tend to imitate others to exhibit herd behavior is that they assume that the others have information that justifies their actions the information cascade models of banerjee 1992 and bikhchandani et al 1992 are significant developments in showing some general equilibrium and welfare effects of such rational imitative behavior but these models as specified may be of limited applicability since they assert that differences across groups in herd behavior can be attributed to the random decisions of first movers differences across groups in herd behavior might be explained more often in terms of different modes of interpersonal information transmission patterns of human conversation imply great selectivity to the kinds of information transmitted within groups this abstract was borrowed from another version of this item

the nature and nurture of economic outcomes this paper uses data on adopted children to examine the relative importance of biology and environment in determining educational and labor market outcomes i employ three long term panel data sets which contain information on adopted children their adoptive parents and their biological parents in at least two of the three data sets the mechanism for assigning children to adoptive parents is fairly random and does not match children to adoptive parents based on health race or ability i find that adoptive parents education and income have a modest impact on child test scores but a large impact on college attendance marital status and earnings in contrast with existing work on iq scores i do not find that the influence of adoptive parents declines with child age this abstract was borrowed from another version of this item

twin picks disentangling the determinants of risk taking in household portfolios this paper investigates risk taking in the liquid portfolios held by a large panel of swedish twins we document that the portfolio share invested in risky assets is an increasing and concave function of financial wealth leading to different risk sensitivities across investors human capital which we estimate directly from individual labor income also affects risk taking positively while internal habit and expenditure commitments tend to reduce it our microfindings lend strong support to decreasing relative risk aversion and habit formation preferences furthermore heterogeneous risk sensitivities across investors help reconcile individual preferences with representative agent models

monte carlo methods for security pricing the monte carlo approach has proved to be a valuable and flexible computational tool in modern finance this paper discusses some of the recent applications of the monte carlo method to security pricing problems with emphasis on improvements in efficiency we first review some variance reduction methods that have proved useful in finance then we describe the use of deterministic low discrepancy sequences also known as quasi monte carlo methods for the valuation of complex derivative securities we summarize some recent applications of the monte carlo method to the estimation of partial derivatives or risk sensitivities and to the valuation of american options we conclude by mentioning other applications

intergenerational transmission of risk attitudes a revealed preference approach using data the german socio economic panel gsoep we investigate whether the willingness to take risks which is revealed via observed choices of occupation is transmitted from parents to children our approach resembles the one by dohmen et al 2008 who investigate the same question using stated preferences as risk variable we use earnings risk measured by the cross sectional coecient of residual variation obtained from mincerian wage regressions we nd that fathers riskiness of the job chosen is a signicant determinant of sons occupational risk our results are robust to dierent specications underpinning the hypothesis of intergenerational transmission of risk preferences

the persistence of social strategies under increasing competitive pressure abstract in this paper we study the long run outcome if firms are repeatedly matched to play a n firm cournot oligopoly game and can select their type of business objective firms can either be profit maximizing or socially concerned also pursuing consumer welfare we use an indirect evolutionary approach to distinguish between the endogenous profit maximizing choice of the firms business objectives and their corresponding market behavior our main result is that the prospects of long run survival of firms pursuing social strategies strongly depends on the number of firms in the industry if a social strategy entails higher marginal production costs it is best suited if the number of firms in the industry is not too large in particular we demonstrate that the relation between long survival and the level of competitiveness of the industry is inverse u shaped we confirm this result by using the concept of coalition stability and further show that if a high number of firms adopt a social strategy welfare might be lower than with just profit maximizing firms

self directed pensions gender risk and portfolio choices in this paper i investigate gender differences in financial risk taking from a new perspective and i show that gender plays a different role across the risk distribution to evaluate risk taking i exploit portfolio choices following a reform that entitles almost the entire swedish workforce to choose a risk profile for a part of their public pension contributions the novel finding is that portfolio risk does not differ much between the men and women who choose less risky portfolios while the men who choose risky portfolios take on significantly more risk than do the women who choose risky portfolios the findings are robust to investors choosing the default alternative chasing past returns rebalancing and different measures of risk taking

convergence in the finite cournot oligopoly with social and individual learning abstract convergence to the nash equilibrium in a cournot oligopoly is a question that recurrently arises as a subject of controversy in economics the development of evolutionary game theory has provided an equilibrium concept more directly connected with adjustment dynamics and the evolutionary stability of the equilibria of the cournot game have been extensively studied in the literature several articles show that the walrasian equilibrium is the stable ess of the cournot game but no general result has been established for the difficult case of simultaneous heterogenous mutations authors propose specific selection dynamics to analyze this case vriend 2000 proposes using a genetic algorithm for studying learning dynamics in this game and obtains convergence to cournot equilibrium with individual learning the resulting convergence has been questioned by arifovic and maschek 2006 the aim of this article is to clarify this controversy it analyzes the mechanisms that are behind these contradictory results and underlines the specific role of the spite effect we show why social learning gives rise to the walrasian equilibrium and why in a general setup individual learning can effectively yield convergence to the cournot equilibrium we also illustrate these general results by systematic computational experiments

the effects of marital status and children on savings and portfolio choice this paper investigates the impact of demographic shocks on optimal decisions about saving life insurance and most centrally asset allocation we analyze these choices within the framework of a life cycle model that features exogenous changes in family composition heterogeneity in lifetime income and uninsurable fluctuations in earnings and medical costs our analysis indicates that marital status transitions and children can have important effects on optimal household decisions widowhood induces sharp reductions in the portfolio shares in stock and the impact is largest for women and individuals with children divorce causes men and women to reallocate their portfolios in different directions men choose much riskier allocations while women opt for safer ones children play a fundamental role in the optimal portfolio decisions men with children for example increase their shares in response to divorce by less than half as much as men without children comparing our simulation results with panel data evidence on stockholding from the psid and the hrs we conclude that changes in marital status and children matter empirically as well but not always in the ways that the model predicts

evolutionary competition in a mixed market with socially concerned firms abstract in this paper we study an oligopoly market where profit maximizing firms and socially concerned firms compete in quantities confronting remarks by milton friedman and gary becker we are using an evolutionary setting to investigate the endogenous choice of the proper objective of business firms and the influence of product differentiation on the long run survival of firms which pursue non profit motives we find that firms which consider a combination of profit and consumer welfare can indeed have larger market shares and profits than their profit maximizing rivals one insight is that it might pay off for shareholders to consider stakeholder welfare but that the level of social concern should not be too high based on a strategy s profitability we consider asynchronous evolutionary updating with firms selecting nash quantities or choosing best replies to the expected market quantity here we observe that the consumers willingness to pay a price premium for products is crucial for the long run survival of socially concerned firms depending on the degrees of product differentiation and social concern long run outcomes consist either of both types of firms or only one type of firm if the firms propensity to switch between a social or a profit maximizing strategy is sufficiently large steady states are unstable and even complicated dynamics can occur

an illustration of the essential difference between individual and social learning and its consequences for computational analyses abstract drawing a conclusion from recent insights in evolutionary game theory we show that a so called spite effect implies that there is an essential difference between individual and social learning we illustrate its consequences for the choice of computational tools in economics and social settings in general by analyzing two variants of a genetic algorithm

education and saving the long term effects of high school financial curriculum mandates abstract over the last 40 years a majority of states have adopted consumer education policies and a sizable minority have mandated that high school students receive instruction on topics related to household financial decision making in this paper we attempt to determine whether these mandates have had any effect on subsequent decisions we exploit the variation in requirements both across states and over time to identify the effects of interest the evidence indicates that mandates have raised both exposure to financial curricula and subsequent asset accumulation once exposed students reached adulthood the estimated effects are gradual probably due to implementation lags

the genetics of investment biases abstract for a long list of investment biases including lack of diversification excessive trading and the disposition effect we find that genetic differences explain up to 45 of the remaining variation across individual investors after controlling for observable individual characteristics the evidence is consistent with a view that investment biases are manifestations of innate and evolutionary ancient features of human behavior we find that work experience with finance reduces genetic predispositions to investment biases finally we find that even genetically identical investors who grew up in the same family environment often differ substantially in their investment behaviors due to individual specific experiences or events

on the origins of risk taking in financial markets risk taking in financial markets is highly correlated between parents and their children however little is known about the extent to which these relationships are genetic or determined by environmental factors we use data on stock market participation of swedish adoptees and relate this to the investment behavior of both their biological and adoptive parents we find that stock market participation of parents increases that of children by about 34 and that both pre birth and post birth factors are important however once we condition on having positive financial wealth we find that nurture has a much stronger influence on risk taking by children and the evidence of a relationship between stock holding of biological parents and their adoptive children becomes weaker we find similar results when we study the share of financial wealth that is invested in stocks this suggests that a substantial proportion of the transmission of risk behavior from parents to children is environmentally determined

social interaction and stock market participation we propose that stock market participation is influenced by social interaction in our model any given social investor finds the market more attractive when more of his peers participate we test this theory using data from the health and retirement study and find that social households those who interact with their neighbors or attend church are substantially more likely to invest in the market than non social households controlling for wealth race education and risk tolerance moreover consistent with a peer effects story the impact of sociability is stronger in states where stock market participation rates are higher

oligopoly games with local monopolistic approximation we propose an oligopoly game where quantity setting firms have incomplete information about the demand function at each time step they solve a profit maximization problem assuming a linear demand function and ignoring the effects of the competitors outputs despite such a rough approximation that we call local monopolistic approximation lma the repeated game may converge at a nash equilibrium of the game played under the assumption of full information an explicit form of the dynamical system that describes the time evolution of oligopoly games with lma is given for arbitrary differentiable demand functions provided that the cost functions are linear or quadratic in the case of isoelastic demand we show that the game based on lma always converges to a nash equilibrium this result compared with best reply dynamics shows that in this particular case less information implies more stability

learning cycles in bertrand competition with differentiated commodities and competing learning rules this paper stresses the importance of heterogeneity in learning we consider a bertrand oligopoly with firms using either least squares learning or gradient learning for determining the price we demonstrate that convergence properties of the rules are strongly affected by heterogeneity in particular gradient learning may become unstable as the number of gradient learners increases endogenous choice between the learning rules may induce cyclical switching stable gradient learning gives higher average profit than least squares learning making firms switch to gradient learning this can destabilize gradient learning which because of decreasing profits makes firms switch back to least squares learning

the evolution of intertemporal preferences where do preferences come from what determines their properties though traditionally reluctant to ask such questions economists have recently turned to evolutionary models for answers we focus on intertemporal preferences here arising out of the evolutionary implications of different reproductive strategies or life histories an agent s life history specifies the agent s number and timing and in a richer model quality of offspring evolution will select the life history that maximizes the growth rate of the associated group of individuals we begin with the simplest possible biological life history that of a semelparous agent that if it survives a fixed number of years reproduces and then dies we show the evolutionary criterion for success in this case entails hyperbolic time discounting of the log of the number of offspring produced the rate of time preference is a function of age however not of time relative to the present and there are no preference reversals in the sense of behavioral economics at the same time the optimal strategy maximizes the exponentially discounted number of offspring provided we discount at the sum of the death rate and the maximal growth rate conventional discounting thus suffices to induce optimal choices from the agent more generally if the animal is iteroparous that is has a nondegenerate profile of offspring we show the evolutionary indifference curves over offspring of various ages are hyperplanes that are not parallel but tilt to reflect greater impatience as the growth rate increases there is no additively separable function of the age profile of expected offspring that is globally equivalent to this basic biological growth rate the evolution of intertemporal preferences

is schooling mostly in the genes nature nurture decomposition using data on relatives we modify r a fisher s model by incorporating measures of the environment that may be correlated across kin groups we estimate a model of schooling attainment using data on eight kin groups and find a large contribution of genetic endowments to the variance in schooling though certain aspects of the environment matter

the effects of financial education in the workplace evidence from a survey of households abstract we use a novel household survey to investigate the effects of employer based financial education on personal saving we explore cross sectional relations between the availability of employer based financial education and various measures of asset accumulation and we interpret these patterns in light of various potentially confounding factors our findings favor the hypothesis that employer based financial education stimulates saving both in general and for retirement

genetic variation in financial decision making individuals differ in how they construct their investment portfolios yet empirical models of portfolio risk typically account only for a small portion of the cross sectional variance this paper asks whether genetic variation can explain some of these individual differences following a major pension reform swedish adults had to form a portfolio from a large menu of funds we match data on these investment decisions with the swedish twin registry and find that approximately 25 of individual variation in portfolio risk is due to genetic variation we also find that these results extend to several other aspects of financial decision making

learning from the behavior of others conformity fads and informational cascades learning by observing the past decisions of others can help explain some otherwise puzzling phenomena about human behavior for example why do people tend to converge on similar behavior why is mass behavior prone to error and fads the authors argue that the theory of observational learning and particularly of informational cascades has much to offer economics business strategy political science and the study of criminal behavior

selection dynamics asymptotic stability and adaptive behavior selection dynamics are often used to distinguish stable and unstable equilibria this is particularly useful when multiple equilibria prevent a priori comparative static analysis this paper reports an experiment designed to compare the accuracy of the myopic best response dynamic and an inertial selection dynamic the inertial selection dynamic makes more accurate predictions about the observed mutual best response outcomes

estimates of the economic returns to schooling from a new sample of twins this paper uses a new survey to contrast the wages of genetically identical twins with different schooling levels multiple measurements of schooling levels were also collected to assess the effect of reporting error on the estimated economic returns to schooling the data indicate that omitted ability variables do not bias the estimated return to schooling upward but that measurement error does bias it downward adjustment for measurement error indicates that an additional year of schooling increases wages by 12 to 16 percent a higher estimate of the economic returns to schooling than has been previously found copyright 1994 by american economic association

the evolution of walrasian behavior consider an evolutionary context where a given number of quantity setting oligopolists tend to mimic successful behavior occasionally experimenting with some small probability in this context it is shown that the unique long run outcome of the process has all firms playing walrasian i e choosing an output that maximizes profits when taking the market clearing price as given

a dynamic model of quality competition with endogenous prices abstract we develop a dynamic model of price and quality competition in order to analyze the effects of competition on quality provision and to which extent an unregulated market is able to provide a socially optimal quality level our model combines a differential game approach with a hotelling spatial competition framework and our analysis applies in particular to industries such as long term care health care child care and education if providers nursing homes hospitals schools nurseries use closed loop decision rules which imply strategic interaction over time we show that although increased competition leads to higher quality in the steady state quality provision is nevertheless lower than under open loop rules and also suboptimally low from a welfare perspective thus our analysis identifies dynamic strategic interaction between competing providers as a potential source of inefficiency in quality provision

income schooling and ability evidence from a new sample of identical twins we develop a model of optimal schooling investments and estimate it using new data on approximately 700 identical twins we estimate an average return to schooling of 9 percent for identical twins but estimated returns appear to be slightly higher for less able individuals simple cross section estimates are marginally upward biased these empirical results imply that abler individuals attain more schooling because they face lower marginal costs of schooling not because of higher marginal benefits

how large are the effects from changes in family environment a study of korean american adoptees i analyze a new set of data on korean american adoptees who were quasi randomly assigned to adoptive families i find large effects on adoptees education income and health from assignment to parents with more education and from assignment to smaller families parental education and family size are significantly more correlated with adoptee outcomes than are parental income or neighborhood characteristics outcomes such as drinking smoking and the selectivity of college attended are more determined by nurture than is educational attainment using the standard behavioral genetics variance decomposition i find that shared family environment explains 14 percent of the variation in educational attainment 35 percent ofthe variation in college selectivity and 33 percent of the variation in drinking behavior

an evolutionary cournot model with limited market knowledge abstract in this paper we analyze a dynamic game of cournot competition with heterogeneous firms choosing between two different adaptive behavioral rules in deciding output strategies the underlying oligopoly structure is standard using a constant return to scale technology n firms produce homogeneous goods which are sold in a market characterized by constant price elasticity in this setup we assume that a fraction of firms employs a quite rough rule of thumb the so called local monopolistic approximation lma whereas the complementary fraction plays best reply br a more demanding strategy in terms of information and computation requirements the model is first considered with exogenously fixed fractions of firms in the two complementary groups then it is generalized by considering an endogenous evolutionary switching process between the two behavioral strategies based on profit driven replicator dynamics the role of the number of firms information costs and inertia or anchoring attitude in production decisions is analyzed as well as the influence in the evolutionary process of random noise in the demand function and memory of past profits global properties of the oligopoly with evolutionary pressure between behavioral rules are discussed with particular regard to cases in which the nash equilibrium is unstable

participation and investment decisions in a retirement plan the influence of colleagues choices abstract this paper investigates whether peer effects play an important role in retirement savings decisions we use individual data from employees of a large university to study whether individual decisions to enroll in a tax deferred account plan sponsored by the university and the choice of the mutual fund vendor for people who choose to enroll are affected by the decisions of other employees in the same department to overcome the identification problems we divide the departments into sub groups along gender status age and tenure lines and we instrument the average participation of each peer group by the salary or tenure structure in this group our results suggest that peer effects may be an important determinant of savings decisions

nature or nurture what determines investor behavior abstract using data on identical and fraternal twins complete financial portfolios we decompose the cross sectional variation in investor behavior we find that a genetic factor explains about one third of the variance in stock market participation and asset allocation family environment has an effect on the behavior of young individuals but this effect is not long lasting and disappears as an individual gains experience frequent contact among twins results in similar investment behavior beyond a genetic factor twins who grew up in different environments still display similar investment behavior our interpretation of a genetic component of the decision to invest in the stock market is that there are innate differences in factors affecting effective stock market participation costs we attribute the genetic component of asset allocation the relative amount invested in equities and the portfolio volatility to genetic variation in risk preferences

the behavioral genetics of behavioral anomalies a number of recent papers have examined the environmental and genetic sources of individual differences in economic and financial decision making here we contribute to this burgeoning literature by extending it to a number of key behavioral anomalies that are thought to be of importance for consumption savings and portfolio selection decisions using survey based evidence from more than 11 000 swedish twins we demonstrate that a number of anomalies such as for instance the conjunction fallacy default bias and loss aversion are moderately heritable in contrast our estimates imply that variation in common environment explains only a small share of individual differences we also report suggestive evidence in favor of a shared genetic architecture between cognitive reflection and a subset of the studied anomalies these results offer some support for the proposition that the heritable variation in behavioral anomalies is partly mediated by genetic variance in cognitive ability taken together with previous findings our results underline the importance of genetic differences as a source of heterogeneity in economic and financial decision making this paper was accepted by brad barber teck ho and terrance odean special issue editors

why do so few hold stocks the authors investigate why 75 percent of u s households do not hold stocks despite the equity premium and predictions of expected utility models the question is relevant for privatization asset pricing and tax progressivity issues they show that risk aversion per se heterogeneity of beliefs habit persistence time nonseparability and quantity constraints on borrowing do not account for the phenomenon a wedge between borrowing and lending rates and minimum investment requirements are plausible but empirically weak factors more promising explanations are inertia and departures from expected utility maximization there is also qualified support for nondiversifiable income risk as a contributing factor copyright 1995 by royal economic society

design choices in privatized social security systems learning from the swedish experience in the 2000 u s presidential campaign george w bush advocated a partial privatization of the social security system according to his plan a portion of the payroll tax would be designated for individual savings accounts at the same time as this issue was being debated in the united states sweden was in the process of launching a system that is very similar to president bush s proposal although bush s plan did not get much attention in the early years of his administration the proposal may resurface either in the united states or in other countries if so important lessons can be learned from the swedish experience in particular the swedish plan adopted an interesting mix of design choices that can now be evaluated based on three years of post implementation experience although there is a large literature in economics on the design of social security systems most of that literature is concerned with macroeconomic considerations such as funding in contrast there has been much less attention devoted to the details of how plans might be designed in part because these details do not seem important from a standard economic perspective in this paper we reverse this usual pattern and focus our attention on the design aspects of the swedish plan we find that although most of the design choices are those that might be approved by most economists in some cases these choices produced undesirable consequences

survey evidence on diffusion of interest and information among investors abstract questionnaire surveys of institutional and individual investors were undertaken to learn about patterns of communications it was found that direct interpersonal communications are very important in investor decisions questions elicited what fraction of investors were unsystematic and allowed themselves to be influenced by word of mouth communications or other salient stimuli randomly sampled investors were studied as well as investors in stocks whose price had recently increased dramatically contagion or epidemic models of financial markets are proposed in which interest in individual stocks is spread by word of mouth the survey evidence is interpreted as supporting such models

evolution of time preferences and attitudes toward risk this paper explores a general model of the evolution and adaption of hedonic utility it is shown that optimal utility will be increasing strongly in regions where choices have to be made often and decision mistakes have a severe impact on fitness several applications are suggested in the context of intertemporal preferences the model offers an evolutionary explanation for the existence of conflicting short and long run interests that lead to dynamic inconsistency concerning attitudes toward risk an evolutionary explanation is given for s shaped value functions that adjust to the decision maker s environment jel d81 d83 this paper is based on the hypothesis that individual decisions are guided by hedonic util ity an individual who faces several alternatives will choose the one that promises the greatest pleasure or happiness then given that the properties of a hedonic utility function determine individual behavior and individual behavior determines biological fitness evolutionary forces will have shaped our utility during the long time in which the modern human being evolved in this sense hedonic utility can be considered as a reward system that induces individuals to make optimal choices a view that is supported both by theory and evidence from neuroscience 1 as irving kupfermann eric r kandel and susan iversen 2000 express it pleasure is unques tionably a key factor in controlling the motivated behaviors of humans 1007 for the econo mist the interesting question is then about the properties of the evolutionary optimal reward system and how these properties adapt to the environment in which individuals make choices the present paper reconsiders and solves a general model of the evolution of utility suggested by arthur j robson 2001a which predicts how cardinal properties of utility functions should adapt to the decision environment it turns out that the optimal utility function will be steep in regions where decisions have to be made frequently and where wrong decisions would lead to large losses in fitness in those regions even small changes in consumption will cause large changes in happiness the evolution of context specific utility functions is then shown to be optimal whenever the decisions our ancestors had to make arrived in distinct choice situations the model can also be extended to incorporate learning about evolutionary relevant attributes of available options

endogenous fluctuations under evolutionary pressure in cournot competition abstract an evolutionary game theoretic model of cournot competition is investigated individuals choose from a finite set of different behavioral rules each rule specifies the quantity to be produced in the current period as a function of past quantities using more sophisticated rules may require extra information costs based upon realized payoffs the fractions of the population choosing a certain behavioral rule are updated according to the replicator equation with noise the long run behavior of the evolutionary system consisting of the population dynamics coupled with the quantity dynamics of the cournot game may be complicated and endogenous fluctuations may arise we consider a typical example where firms can choose between two rules the nash rule and the best reply rule we show that a homoclinic tangency between the stable and unstable manifold of the equilibrium occurs as evolutionary pressure increases implying bifurcation routes to complicated dynamics and strange attractors

a strategic and welfare theoretic analysis of free trade areas abstract we construct a three country model to determine how the formation of free trade areas ftas affects optimal tariffs and welfare we find that at constant rest of the world row tariffs the adoption of internal free trade induces union members to reduce their external tariffs below the kemp wan j int econom 6 1976 95 97 level and causes row s terms of trade to improve and its welfare to rise when row also behaves optimally its policy response to the formation of the fta is to raise tariffs generally fta members prefer to liberalize internal trade partially and find regional integration appealing only if their collective size is sufficiently large we also demonstrate how ftas may undermine the attainment of global free trade

equilibrium selection in a nonlinear duopoly game with adaptive expectations abstract we analyze a nonlinear discrete time cournot duopoly game where players have adaptive expectations the evolution of expected outputs over time is generated by the iteration of a noninvertible two dimensional map the long run behavior is characterized by multistability that is the presence of coexisting stable consistent beliefs which correspond to nash equilibria in the quantity space hence a problem of equilibrium selection arises and the long run outcome strongly depends on the choice of the players initial beliefs we analyze the basins of attraction and their qualitative changes as the model parameters vary we illustrate that the basins might be nonconnected sets and reveal the mechanism which is responsible for this often neglected kind of complexity the analysis of the global bifurcations which cause qualitative changes in the topological structure of the basins is carried out by the method of critical curves

biological correlates of the allais paradox we conducted a questionnaire study with student subjects to look for explicit correlations between selected biological characteristics of the subjects and manifestation of the allais paradox in the pattern of their choices between sets of two pairs of risky prospects we found that particular characteristics such as gender menstrual cycle mother s age at delivery parenthood second to fourth digit ratio perceived negative life events and emotional state can be related to the paradox women particularly when not menstruating are less susceptible to the paradox those born to not too young mothers are also less prone to the paradox the same holds true for men who have fathered children and had been exposed to high levels of prenatal testosterone people who had experienced many negative life events and those who were anxious excited aroused happy active or fresh at the time of the experiment further left handers and atheists may be less inclined to display the paradox

stature obesity and portfolio choice using multiple u s and european data sources we show that observed physical attributes are related to participation in financial markets specifically we find that individuals who are relatively tall and of normal weight are more likely to hold stocks in their financial portfolios we consider several potential mechanisms that could drive the relation between physical attributes and portfolio decisions we find that teenage social experiences as well as genetic and prenatal endowments that are fixed at birth are the two channels through which height affects financial decisions furthermore we find that the relation between body mass index and portfolio decisions is largely driven by education and race data as supplemental material are available at http dx doi org 10 1287 mnsc 2016 2508 this paper was accepted by wei jiang finance