an economic theory of self control the concept of self control is incorporated in a theory of individual intertemporal choice by modeling the individual as an organization the individual at a point in time is assumed to be both a farsighted planner and a myopic doer the resulting conflict is seen to be fundamentally similar to the agency conflict between the owners and managers of a firm both individuals and firms use the same techniques to mitigate the problems which the conflicts create this paper stresses the implications of this agency model and discusses as applications the effect of pensions on saving saving and the timing of income flows and individual discount rates

preferred risk habitat of individual investors abstract the preferred risk habitat hypothesis introduced here is that individual investors select stocks whose volatilities are commensurate with their risk aversion the data 1995 2000 holdings of over 20 000 clients at a large german broker are consistent with the predictions of the hypothesis the returns of stocks within each portfolio have remarkably similar volatilities when stocks are sold they are replaced by stocks of similar volatilities and the more risk averse customers indeed hold less volatile stocks greater volatility specialization is associated with lower sharpe ratios primarily because more specialized investors hold fewer stocks and thereby expose themselves to more unsystematic risk

a behavioral framework for time diversification the box of factors that we call risk is both too large and too small the box is large enough to include many sometimes conflicting measures of risk variance and semivariance probabilities of losses and their amounts but the box is too small to include factors that affect choices but fall outside the boundaries of risk frames and cognitive errors self control and regret we explore the role of these factors in time diversification the belief that time diversification reduces risk underlies the current drive to invest social security funds in stocks but is such investment prudent we discuss the role of advisors in providing prudent advice changes in the standards of prudence over time the use of time diversification in guiding investors to prudent portfolios and its use in the current debate on social security

an examination of the efficiency of the london traded options market this paper examines the pricing of call options on the london traded options market using month end data on 16 companies from april 1978 to july 1983 the black and scholes model is successful in identifying mispriced options and therefore appears to be applicable however the significant profits which can be made from using the model in establishing riskless spreads do not exceed transactions costs the market cannot therefore be said to be inefficient in the narrowly financial sense it remains to investigate whether the very large bid ask spreads on this market which are the major component of transactions costs are actually justified by the risks borne by market makers

do individual investors treat trading as a fun and exciting gambling activity evidence from repeated natural experiments we hypothesize that individual investors treat trading as a fun and exciting gambling activity implying substitution between this activity and alternative gambling opportunities to examine this hypothesis we study the lottery jackpots and the trading of individual investors in taiwan when the jackpots exceed 500 million taiwan dollars the trading volume decreases between 5 2 and 9 1 among stocks preferred by individual investors and between 6 8 and 8 6 among lottery like stocks the decline in individual buy volume is statistically indistinct from the decline in sell volume large jackpots are associated with less trading in options with high sensitivity to volatility

ex day behavior with dividend preference and limitations to short term arbitrage the case of swedish lottery bonds abstract swedish lottery bonds offer a unique opportunity to study ex day effects in an environment where cash distributions are tax advantaged relative to capital gains thus in the lottery bond market we observe a reversal of the preference for capital gains that researchers have cited as an explanation for the ex day behavior of u s equities further in this market there are barriers to short term arbitrage when prices do reflect the tax preferences of individual investors we find the bonds are priced around the ex day to reflect differential tax rates on income and capital gains consistent with the prevailing tax regimes the bonds consistently experience negative returns over the coupon payment period and in fact often sell at negative yields prior to the cash distribution as one would expect given tax motivated trading between high tax investors who buy prior to the distribution and low tax investors who buy after the distribution

cautious risk takers investor preferences and demand for active management actively managed mutual funds have distinct return distributions from their passive benchmarks and our theoretical analysis using tail sensitive risk preferences suggests that active value and growth funds may serve to reduce downside risk and capture upside potential respectively furthermore tail sensitivity measures estimated from the empirical pricing kernel have significant explanatory power for active fund flows even after controlling for business cycles and market wide sentiment finally active funds unlike their passive counterparts have exposures to option strategies hedging downside risk or capturing upside potential

trading as gambling this paper offers evidence from three different samples consistent with investors substituting between playing the lottery and gambling in financial markets in the united states increases in the jackpots of the multistate lotteries powerball and mega millions are associated with significant reductions in small trade participation in the stock market california based discount brokerage clients and german discount brokerage clients are significantly less likely to trade during weeks with larger lottery prizes in the california and german lotteries respectively variation in lottery prizes affects speculative trading in more lottery like securities such as individual stocks and options but not trading in bonds and mutual funds trading that is likely associated with long term savings motives such as trading in retirement accounts does not respond to lottery jackpots either the negative relation between trading activity and jackpots is stronger for individuals who are more likely to play the lottery this paper was accepted by brad barber finance

behavioral biases of mutual fund investors we examine the effect of behavioral biases on the mutual fund choices of a large sample of us discount brokerage investors using new measures of attention to news tax awareness and fund level familiarity bias in addition to behavioral and demographic characteristics of earlier studies behaviorally biased investors typically make poor decisions about fund style and expenses trading frequency and timing resulting in poor performance furthermore trend chasing appears related to behavioral biases rather than to rationally inferring managerial skill from past performance factor analysis suggests that biased investors often conform to stereotypes that can be characterized as gambler smart overconfident narrow framer and mature

ownership effects among native american banks 2001 2016 abstractminority depository institutions mdis including native american banks natbs play an integral role in providing financial services to the under served natbs are split between those th

portfolio optimization with mental accounts we integrate appealing features of markowitz s mean variance portfolio theory mvt 4 and shefrin and statman s behavioral portfolio theory bpt into a new mental accounting 5 ma framework features of the ma framework include an ma structure of portfolios 6 a definition of risk as the probability of failing to reach the threshold level in each mental 7 account and attitudes toward risk that vary by account we demonstrate a mathematical 8 equivalence between mvt ma and risk management using value at risk var the ag9

errors in variables bounds in a tobit model of endogenous protection the errors in variables eiv problem is pervasive in econometrics but has not received the attention it deserves perhaps because it is difficult to resolve the first objective of this paper is to demonstrate the effectiveness of recently developed methods to deal with the eiv problem in models with censoring the second objective of this paper is to empirically examine in light of the eiv problem theories of endogenous protection that have become important in trade theory in their ability to explain why nations do not follow the traditional economic maxim of free trade these theories emphasizing political economic factors have gained momentum based on a set of empirical studies that have sought to prove their validity whether inferences about the theories of endogenous protection are gravely affected by errors in variables is examined using data on u s nontariff barriers with respect to nine developed countries the theoretical developments in klepper 1988 and klepper and leamer 1984 are combined with a result from levine 1986 which usefully extends the use of eiv diagnostics to a model with censoring

lottery players stock traders the behavior of stock traders and lottery buyers can teach us about our common aspirations thoughts and emotions and help answer many questions of finance

optimal security design how should new securities be designed traditional theories have little to say on this the literature on capital structure and general equilibrium theories with incomplete markets take the securities firms issue as exogenous this paper explicitly incorporates the transaction costs of issuing securities and develops a model where the instruments that are traded are chosen optimally and the economy s market structure is endogenous among other things it is shown that the firm s income stream should be split so that in every state all payoffs are allocated to the security held by the group that values them most this abstract was borrowed from another version of this item

implications for gaap from an analysis of positive research in accounting based on extant literature we review the positive theory of gaap the theory predicts that gaap s principal focus is on control performance measurement and stewardship and that verifiability and conservatism are critical features of a gaap shaped by market forces we recognize the advantage of using fair values in circumstances where these are based on observable prices in liquid secondary markets but caution against expanding fair values to financial reporting more generally we conclude that rather than converging u s gaap with ifrs competition between the fasb and the iasb would allow gaap to better respond to market forces

bank regulation and international financial stability a case against the 2006 basel framework for controlling tail risk in trading books abstract in attempting to promote international financial stability the basel committee on banking supervision 2006 provided a framework that sought to control the amount of tail risk that large banks around the world would take in their trading books relative to their corresponding minimum capital requirements however many of these banks suffered significant trading losses during the recent financial crisis our paper examines whether the basel framework allowed banks to take substantive tail risk in their trading books without a capital requirement penalty we find that it allowed banks to do so and that its minimum capital requirements can be notably procyclical hence focusing on the way the basel framework sought to control the amount of tail risk in trading books relative to their corresponding minimum capital requirements our paper supports the view that it was not properly designed to promote financial stability we also discuss alternative regulatory frameworks that would potentially be more effective than the basel framework in preventing banks from taking substantive tail risk in their trading books without a capital requirement penalty

what is the optimal design for lottery linked savings programmes in this article we determine the optimal design of lottery linked savings lls programmes lls vehicles such as lottery bonds are financial instruments that preserve depositors principal but provide randomized variable returns to these depositors through periodic lottery drawings in lieu of the regular coupon payments traditionally received by bondholders this type of asset is very popular in europe we note that the framing of lls instruments is linked to their popularity and we attempt to elucidate that link and thereby determine the optimal structure of payments for lls programmes our goal is to frame lls programmes in a manner that both maximizes their investors satisfaction and preserves their ability to serve as inexpensive sources of capital for their issuers we demonstrate that the optimal pay off structure is characterized by a high level of skewness as investors are willing to accept a decrease in the small and medium prizes of the lottery in exchange for an increase in the grand pri

put call parity theory and an empirical test of the efficiency of the london traded options market abstract put call parity theory in the presence of dividends is extended to take account of transaction costs and new testable models are derived these models are used to test the efficiency of the london traded options market using synchronous option and share prices when account is taken only of option spread significant numbers of deviations from put call parity are identified when commission costs on options and shares are considered however almost none of these deviations prove to be exploitable

union membership in the united states 1973 1981 this paper reports estimates of union membership gathered from may current population surveys from 1973 to 1981 the authors present data by occupation industry selected states and smsas race gender and educational attainment the paper both extends and differs from that by freeman and medoff which presents unionism estimates for the private sector for 1968 75 to facilitate longitudinal analysis this paper reports three year moving averages of occupational and industry data and annual estimates of demographic classifications the data include public sector as well as private sector workers and they exclude workers not covered by the national labor relations act also the authors provide only union membership estimates not estimates on workers covered by union contracts this paper suggests that the percentage of all workers that are unionized in the united states remained fairly constant over the 1973 81 period

on portfolio choice with savoring and disappointment we revisit the model proposed by gollier and muermann gollier c muermann a 2010 optimal choice and beliefs with ex ante savoring and ex post disappointment management sci 568 1272 1284 hereafter gm in the gm model for a given lottery agents form anticipated expected payoffs and the set of possible anticipations is assumed to be exogenously fixed we propose sets of possible anticipations that are endogenously determined this permits us to compare and evaluate in a consistent manner lotteries with different supports and to revisit the portfolio choice problem we obtain new conclusions and interesting insights our extended model can rationalize a variety of empirically observed puzzles such as a positive demand for assets with negative expected returns preference for skewed returns and underdiversification of portfolios this paper was accepted by rakesh sarin decision analysis

experimental tests of the separation theorem and the capital asset pricing model a computer controlled multistage portfolio selection task was devised to test experimentally basic assumptions underlying the separation theorem and the capital asset pricing model although most of the subjects diversified among the three risky assets the introduction of a riskless asset did not have the effect predicted by the separation theorem nor were the subjects affected by systematic changes in the variance covariance matrix of the risky returns however performance improved as the reward was increased tenfold the capital asset pricing model capm proposed by william sharpe 1964 john lintner 1965 and jan mossin 1966 has been the predominant normative as well as positive theory for determining assets returns and prices in financial markets the capm has a wide range of implications for various financial issues including the allocation of risky assets price predictions performance indices and market efficiency tests as well as tools for corporate finance decisions such as capital structure costs of financial sources and prices of new issues during the last decade numerous theoretical studies have examined and extended the capm a most recent development is the

the long and short of it why are stocks with shorter runs preferred this article examines how consumers process graphical financial information to estimate risk we propose that consumers sample the local maxima and minima of a graph to infer the variation around a trend line which is used to estimate risk the local maxima and minima are more extreme the higher the run length of the stocks the consecutive number of upward or downward movements of a price series with identical mean variance skewness and kurtosis three experiments show that this leads to stocks with higher run lengths being perceived as riskier the run length effect importantly the run length effect is greater for investors who are more educated are employed full time trade more frequently have had longer experience trading and trade a wider range of financial instruments implications for the communication of financial products public policy and consumer welfare are discussed as are theoretical implications for the processing of visual and financial information and behavioral finance

trade wars and trade talks when governments meet in the international arena their actions reflect the political situations at home previous studies of trade relations have focused on governments that are immune from political pressures and that act as benevolent servants of the public interest here we introduce domestic politics into the analysis of international economic relations we study the interactions between national leaders who are concerned both with providing a high standard of living to the general electorate and collecting campaign contributions from special interest groups our analysis sheds light on the determinants of the structure of protection in non cooperative and cooperative policy equilibria

behavioral portfolio theory we develop a positive behavioral portfolio theory bpt and explore its implications for portfolio construction and security design the optimal portfolios of bpt investors resemble combinations of bonds and lottery tickets consistent with friedman and savage s 1948 observation we compare the bpt efficient frontier with the mean variance efficient frontier and show that in general the two frontiers do not coincide optimal bpt portfolios are also different from optimal capm portfolios in particular the capm twofund separation does not hold in bpt we present bpt in a single mental account version bpt sa and a multiple mental account version bpt ma bpt sa investors integrate their portfolios into a single mental account while bpt ma investors segregate their port folios into several mental accounts bpt ma portfolios resemble layered pyramids where layers are associated with aspirations we explore a two layer portfolio where the low aspiration layer is designed to avoid poverty while the high aspiration layer is designed for a shot at riches

a theory of anticipated utility abstract a new theory of cardinal utility with an associated set of axioms is presented it is a generalization of the von neumann morgenstern expected utility theory which permits the analysis of phenomena associated with the distortion of subjective probability

the behavioral relevance of mental accounting for the pricing of financial options abstract the paper reports an experiment on the pricing of financial options arbitrage free option pricing is tested against three hypotheses based on mental accounting the data show that even with considerable experience unexploited arbitrage opportunities persist subjects do not seem to make the connections between the different investment possibilities as essential for arbitrage free pricing afp instead they act as if they associate the risky assets to the same mental account while the bond is treated separately this corresponds to the construction of a two layer portfolio of a risky and a safe layer in the behavioral portfolio theory of shefrin and statman j fin quant anal 35 2000 127

options and structured products in behavioral portfolios abstract options and structured products have no roles in mean variance portfolios but they have roles in behavioral portfolios behavioral portfolios are composed of mental account sub portfolios each associated with a goal such as retirement income or bequest investors optimize each mental account by finding the assets and asset allocation that maximizes the expected return of each mental account sub portfolio subject to the condition that the probability of failing to reach a preset threshold aspiration level not exceed a preset probability put options are useful in downside protection mental accounts whose goal is avoiding poverty whereas call options are useful in upside potential mental accounts whose goal is a shot at riches we also explore the roles in behavioral portfolios of option collars capital guaranteed notes and barrier range notes

an asset allocation puzzle this paper examines popular advice on portfolio allocation among cash bonds and stocks it documents that this advice is inconsistent with the mutual fund separation theorem which states that all investors should hold the same composition of risky assets in contrast to the theorem popular advisors recommend that aggressive investors hold a lower ratio of bonds to stocks than conservative investors the paper explores various possible explanations of this puzzle and finds them unsatisfactory copyright 1997 by american economic association

the economics of special interest politics the case of the tariff this paper investigates the interaction of politicians and special interest lobbies the goal is to model the equilibrium levels of redistributive policies such as taxes subsidies tariffs and regulatory decisions the model is applied throughout to the setting of tariffs by contributing to political campaigns special interest lobbies generate economic returns higher tariffs generate revenue for import competing industries through higher product prices higher milk support prices raise dairy farm income and so forth the lobby invests to maximize these net economic returns in evaluating their chances of election politicians weigh the favorable effects of special interest money against the unfavorable association with the lobby and the social cost of the redistributive policy section i explores the lobby s problem it describes a formalization of mancur olson s discussion of the voluntary provision of public goods and optimal contributions by lobbies to political campaigns section ii describes determination of the equilibrium tariff positions of each politician in a political campaign

portfolio selection with mental accounts and background risk abstract das et al 2010 develop a model where an investor divides his or her wealth among mental accounts with motives such as retirement and bequest nevertheless the investor ends up selecting portfolios within mental accounts and an aggregate portfolio that lie on the mean variance frontier importantly they assume that the investor only faces portfolio risk in practice however many individuals also face background risk accordingly our paper expands upon theirs by considering the case where the investor faces background risk our contribution is threefold first we provide an analytical characterization of the existence and composition of the optimal portfolios within accounts and the aggregate portfolio second we show that these portfolios lie away from the mean variance frontier under fairly general conditions third we find that the composition and location of such portfolios can differ notably from those of portfolios on the mean variance frontier

portfolio selection through maslow s need hierarchy theory inspired by maslow s need hierarchy theory we construct a new portfolio selection framework using the bi level optimization technique in which the lower level need relates to safety low risk whi

household portfolio diversification a case for rank dependent preferences the proliferation of novel preference theories in financial economics is hampered by a lack of non experimental evidence and by the theories additional complexity which has not been shown to be critical in applications in this article i present arguments in support of preferences with rank dependency using the survey of consumer finances data i document two widespread patterns inconsistent with expected utility i many households simultaneously invest in well deversified funds and in poorly diversified portfolios of stocks and ii some households with substantial savings do not invest anything in equities i show that portfolio choice models with rank dependent preferences plausibly parameterized and under fully rational assumptions are quantitatively consistent with the observed diversification these results call for further efforts to integrate the models of rank dependent preferences in portfolio theory and asset pricing the decision theoretic literature has long acknowledged the shortcomings of the expected utility theory of von neumann and morgenstern 1944 several generalizations of the theory are inspired by the experimental evidence and aimed at improving its descriptive accuracy however there are few applications of new models of preferences in finance and expected utility continues to dominate the field 1 two principal hurdles slow the proliferation of novel preferences in financial economics first the lack of empirical non experimental or field data confirming that the behavior motivating non expected utilities is widespread outside the laboratory settings second the additional and often significant complexity of the alternative preferences which has not been shown to be critical in applications where the models based on expected utility fall short of reasonable predictions this article presents empirical and theoretical this paper was previously circulated under the title household portfolio diversification the paper has benefited from the comments of shlomo benartzi luca benzoni markus brunnermeier john dickhaut maria perozek raj singh hersh shefrin and workshop participants at minnesota finance bag lunch 2003 wharton conference household financial decision making and portfolio choice and 2003 summer meetings of econometric society i would like to thank cam harvey the editor and an anonymous referee for many helpful comments and suggestions a special thanks to jack kareken for comments and editorial help on an earlier draft i am grateful to donna zerwitz for editorial assistance the views expressed herein are those of the author and not necessarily of the federal reserve bank of minneapolis or the federal reserve system all errors and omissions are the sole responsibility of the author address correspondence to valery polkovnichenko finance 3 122 csom 319 19 th

keynes meets markowitz the trade off between familiarity and diversification we develop a model of portfolio choice to nest the views of keynes who advocates concentration in a few familiar assets and markowitz who advocates diversification we use the concepts of ambiguity and ambiguity aversion to formalize the idea of an investor s familiarity toward assets the model shows that for any given level of expected returns the optimal portfolio depends on two quantities relative ambiguity across assets and the standard deviation of the expected return estimate for each asset if both quantities are low then the optimal portfolio consists of a mix of familiar and unfamiliar assets moreover an increase in correlation between assets causes an investor to increase concentration in familiar assets flight to familiarity alternatively if both quantities are high then the optimal portfolio contains only the familiar asset s as keynes would have advocated in the extreme case in which both quantities are very high no risky asset is held nonparticipation this paper was accepted by brad barber teck ho and terrance odean special issue editors

the only game in town investors confusion between market gains and trading gains helps explain why they continue trading even though it rarely improves their performance then too some investors reason that if trading based on random selection is as likely to prove profitable as not trading based on any information whatever will result in performance better than neutral the key to the fallacy in their reasoning is the market maker who must impose a spread in order to survive

applying regret theory to investment choices currency hedging decisions we apply regret theory an axiomatic behavioral theory to derive closed form solutions to optimal currency hedging choices investors experience regret of not having chosen the ex post optimal hedging decision hence investors anticipate their future experience of regret and incorporate it in their objective function we derive a model of financial decision making with two components of risk traditional risk volatility and regret risk we find results that are in sharp contrast with traditional expected utility loss aversion or disappointment aversion theories we discuss the empirical implications of our model and its ability to explain observed hedging behavior

gambling preferences options markets and volatility this study examines whether the gambling behavior of investors affects volume and volatility in financial markets focusing on the options market we find that the ratio of call option volume relative to total option volume is greatest for stocks with return distributions that resemble lotteries consistent with the theoretical predictions of stein 1987 we demonstrate that gambling motivated trading in the options market influences future spot price volatility these results not only identify a link between lottery preferences in the stock market and the options market but they also suggest that lottery preferences can lead to destabilized stock prices

rubble logic what did we learn from the great stock market bubble the financial analysts journal s 60th anniversary happens to coincide with the five year anniversary of the peak of the great stock market bubble of 1999 2000 the combination of proximity in time with just a bit of distance makes this year an appropriate time to consider what we may have learned from this momentous event this article suggests lessons that if we haven t learned them we should have

electricity generation cost in isolated system the complementarities of natural gas and renewables in the canary islands abstract the canary islands offer an example of an isolated electric grid of relative important size within the eu due to its peculiarities the role of renewable energies and their complementarity with fossil fuels offers a solid path to achieving the main energy policy goals of the islands the purpose of this paper is to assess the current situation and the energy objectives proposed in the energy plan of the canaries pecan 2006 for the electricity industry taking into account the average cost and the risk associated with the different alternatives for generating electricity by means of the mean variance portfolio theory our analysis highlights the inefficiency of the current electricity generating mix in terms of cost risk and lack of diversification shifting toward an efficient system would involve optimizing the use of endogenous energy sources and introducing natural gas to generate electricity this scenario would mean reducing both cost and risk by almost 30 each as well as atmospheric co 2 emissions our results agree with the pecan philosophy

individual vs aggregate preferences the case of a small fish in a big pond we study the relationship between the risk preferences of individuals and the risk preferences of the aggregate economy to emphasize the vast differences that can occur between individual and market preferences brought about through aggregation we assume an economy consisting entirely of risk seekers we show that such individuals can lead to an aggregate economy that is risk averse the converse is also true an aggregate economy that exhibits risk aversion does not imply an economy of individual risk averters an economy demanding a risk premium can be formed from individuals who do not demand such compensation understanding the relationship between the preferences of individuals and the preferences of the aggregate economy is crucial for understanding the connection between the behavioral finance literature which focuses on individual preferences and the asset pricing literature which focuses on aggregate prices we discuss empirical implications of these results this paper was accepted by wei xiong finance

diversification and its discontents idiosyncratic and entrepreneurial risk in the quest for social status social status concerns influence investors decisions by driving a wedge in attitudes toward aggregate and idiosyncratic risks i model such concerns by emphasizing the desire to get ahead of the joneses which implies that aversion to idiosyncratic risk is lower than aversion to aggregate risk the model predicts that investors hold concentrated portfolios in equilibrium which helps rationalize the small premium for undiversified entrepreneurial risk in the model status concerns are more important for wealthier households consequently these households own a disproportionate share of risky assets particularly private equity and experience greater volatility of consumption consistent with empirical evidence diversification and risk sharing are fundamental principles of modern finance and macroeconomics however empirical evidence suggests that household portfolios are poorly diversified with many people reporting substantial holdings of a single stock for the wealthiest households large shares in closely held businesses constitute a particularly important source of risk e g heaton and lucas 2000a it is not surprising that entrepreneurs bear substantial undiversified risk since it is important for mitigating moral hazard and or adverse selection problems yet from a standpoint of portfolio theory entrepreneurship does not appear to be well compensated implying that many investors are willing to take poorly rewarded risks despite the availability of superior investment opportunities such as public equity that earns a large risk premium e g moskowitz and vissing j0rgensen 2002 hall and woodward 2007

trading as entertainment among 1 000 german brokerage clients for whom both survey responses and actual trading records are available investors who report enjoying investing or gambling turn over their portfolio at twice the rate of their peers including entertainment attributes as additional explanatory variables in cross sectional regressions of portfolio turnover on objective investor attributes more than doubles the fraction of the total variation of portfolio turnover that can be explained the results are robust to controlling for gender and proxies for overconfidence constructed from survey responses nonpecuniary benefits of trading thus appear to offer a straightforward explanation of the excessive trading puzzle

lottery markets design micro structure and macro behavior an ace approach abstract an agent based computational modeling of the lottery market is established in this paper to study the design issue in terms of the lottery tax rate as well as the emerging market behavior by using genetic algorithms and fuzzy logic lottery participants are modeled as autonomous agents who may endogenously adapt to exhibit behavioral properties consistent with well noticed behavior of lottery markets three major findings are presented first as anticipated a laffer curve is found in this model nonetheless the laffer curve has a flat top which indicates the non uniqueness of the optimal lottery tax rate second conscious selection behavior is also observed but it becomes weaker as time goes on third for the halo effect we observe exactly the opposite each of these three findings are then compared with available empirical results and the mechanism of genetic algorithms is further examined in light of the anti halo effect

a note on the no premature exercise condition of dividend payout unprotected american call options a clarification abstract it is shown that merlon s sufficient condition for no rational premature exercise of a dividend payout unprotected american call option is frequently misunderstood and used incorrectly in the finance literature when applied to the multiple dividend case this is especially true in papers we receive to review for journals the purpose of this note is to clarify understanding of the no premature exercise condition