The Behavioral Paradox: Why Investor Irrationality Calls for Lighter and Simpler Financial Regulation

It is widely believed that behavioral economics justifies more intrusive regulation of financial markets, because people are not fully rational and need to be protected from their quirks. This Article challenges that belief. Firstly, insofar as people can be helped to make better choices, that goal can usually be achieved through light-touch regulations. Secondly, faulty perceptions about markets seem to be best corrected through market-based solutions. Thirdly, increasing regulation does not seem to solve problems caused by lack of market discipline, pricing inefficiencies, and financial innovation; better results may be achieved with freer markets and simpler rules. Fourthly, regulatory rule makers are subject to imperfect rationality, which tends to reduce the quality of regulatory intervention. Finally, regulatory complexity exacerbates the harmful effects of bounded rationality, whereas simple and stable rules give rise to positive learning effects

Anomalies in Economics and Finance

The term “anomaly” played a crucial role in Thomas Kuhn’s characterization of scientific progress. For Kuhn, an anomaly is a puzzle which challenges an accepted paradigm. Puzzles only achieve anomalous status once an alternative paradigm becomes available which allows explanation of the puzzle. Anomalies were introduced into the finance literature by Michael Jensen but more as resolvable puzzles than Kuhnian anomalies. They entered economics via Richard Thaler who saw behavioural economics as the alternative to the neoclassical paradigm. Both authors use the term anomaly in a deliberately Kuhnian manner. Kuhn formulated his ideas by looking back across the history of physics. By contrast, behavioural economists use Kuhn’s concepts in a forward-looking manner as a marketing tool for their ideas.anomaly, behavioural, effects.

RECRUITMENT AND SELECTION SYSTEM OF VILLAGES IN WONOSOBO REGENCY

Basic track problems in most of the villages in Wonosobo Regency Government are the recruitment and selection practices of other villages have not been able to encourage the inception of the village with the required standards of competence. This research aims to analyze the system of recruitment and selection of other villages, supporters and restricting factors, as well as establishing a proper and contextual model in Wonosobo Regency over the approach to the management of human resources. With descriptive method, this study found that the standard of competence has not been a consideration for the Government since the beginning of the planning process, to recruitment and selection. Almost the entire selection process, starting from the determination of the criteria of candidates, selection of administration until the written exams tend not based on competence. In addition, the necessary of the village according to the preference of the villagers also has yet to be fulfilled, thus still encountered complaints from the public. The study also identifies some of the factors supporting the recruitment and selection competency-based, among others, regulation and community support. Later, inhibitor factor, among others, the quality of human resources and organizational needs analysis Committee. Based on these conditions, the model recommendations in this study encourages the process of recruitment and selection apply competency — based in practice, in order to be able to support organizational performance towards the village government is better. Start the process of sourcing, attracting, through screening, based on the needs the competence and analyzed scientifically. Community preference is also a consideration in that process in order to involve the public opinion and build public confidence to the results of the selection. These two factors also continue to support are encouraged to be optimal. Meanwhile, an inhibitor of factor continues to be minimized through a variety of innovations

Factors Influence Intention to Opt for Islamic Investment Schemes Among Market Players

Employing theory of reasoned action with religiosity as its additional construct in the model, this paper is aimed at examining factors influence the intention of investors to opt Islamic investment schemes in Malaysia Islamic capital markets. As many as 120 questionnaires were collected from market players in Bursa Malaysia using online survey. Afterwards, the data collected were analyzed using structural equation model to reveal the relationship of variables tested in the proposed model. The result shows that religiosity and subjective norms appeared to be the significant factors affecting intention to choose Islamic investment schemes in Malaysia Islamic capital markets. Interestingly, despite its significant role shown in previous studies, this study has shown insignificant level of the attitude in predicting the intention behavior. The managerial implications are discussed in this paper

POLICY REGIME CHANGE AND CORPORATE CREDIT IN BULGARIA: ASYMMETRIC SUPPLY AND DEMAND RESPONSES

The paper seeks to assess how a major policy regime change – such as the introduction of the currency board in Bulgaria – affects the flow of bank credit to the corporate sector. An attempt is made to identify the determinants of corporate credit separately from the viewpoint of lenders and borrowers. The estimated credit supply and credit demand equations provide empirical evidence of important changes in microeconomic behavioral patterns which can be associated with the policy regime change. The results also suggest a considerable asymmetry in the response of credit supply and credit demand to the policy shock: while the supply shifts were quite pronounced, the patterns of firms’ credit demand remained fairly stable. The policy implications of the detected asymmetry in microeconomic adjustment are also discussed in the paper.http://deepblue.lib.umich.edu/bitstream/2027.42/39993/3/wp607.pd

Newsletter / House of Finance, Goethe-Universität Frankfurt 4/10

Credit Rating Announcements – The Impact of the Agency’s Reason, Public Information, and M&A ; Toward a New European Financial Architecture in the Rating Sector – an Economic Analysis and Legal Solutions ; Where Finance Meets Macro ; Clear Enforcement rules for the Stability and Growth Pac