Risk preference discrepancy : a prospect relativity account of the discrepancy between risk preferences in laboratory gambles and real world investments

In this article, we presented evidence that people are more risk averse when investing in financial products in the real world than when they make risky choices between gambles in laboratory experiments. In order to provide an account for this discrepancy, we conducted experiments, which showed that the range of offered investment funds that vary in their riskreward characteristics had a significant effect on the distribution of hypothetical funds to those products. We also showed that people are able to use the context provided by the choice set in order the make relative riskiness judgments for investment products. This context dependent relativistic nature of risk preferences is proposed as a plausible explanation of the risk preference discrepancy between laboratory experiments and real-world investments. We also discuss other possible theoretical interpretations of the discrepancy

Relativistic financial decisions : context effects on retirement saving and investment risk preferences

We report a study of the effects the choice set on financial decision making related to retirement savings and risky investment. The participants were presented with either a full range of choice options or a limited subset of the feasible options. The choices of saving and risk are affected by the position of each option in the range of presented options. This result demonstrated that the range of the options offered as possible saving rates and levels of investment risk influences decisions about saving and risk. The study was conducted on a sample of working people, and we controlled whether the participants can financially afford in their real life the decisions taken in the test. In addition, various measures of risk aversion did not account for the risk taken in each condition. Surprisingly, only the simplest and most direct risk preference measure was a significant predictor of the responses within a particular choice set context, although the actual choices were still very much influenced by the range. Thus, the results reported here suggest that financial judgments and choices are relative, which corroborates, in an important practical domain, previous related work with abstract gambles and hypothetical risky investments

International Trade: Rules of Origin

[Excerpt] Determining the country of origin of a product is important for properly assessing tariffs, enforcing trade remedies (such as anti-dumping and countervailing duties) or quantitative restrictions (tariff quotas), and statistical purposes. Other commercial trade policies are also linked with origin determinations, such as country of origin labeling and government procurement regulations. Rules of origin (ROO), used to determine the country of origin of merchandise entering the U.S. market, can be very simple, noncontroversial tools of international trade as long as all of the parts of a product are manufactured and assembled primarily in one country. However, when a finished product’s component parts originate in many countries, as is often the case in today’s global trading environment, determining origin can be a very complex, sometimes subjective, and time-consuming process. U.S. Customs and Border Protection (CBP) is the agency responsible for determining country of origin using various ROO schemes. Non-preferential rules of origin are used to determine the origin of goods imported from countries with which the United States has most-favored-nation (MFN) status. They are the principal regulatory tools for accurate assessment of tariffs on imports, addressing country of origin labeling issues, qualifying goods for government procurement, and enforcing trade remedy actions and trade sanctions. Preferential rules are used to determine the eligibility of imported goods from certain U.S. free trade agreement (FTA) partners and certain developing country beneficiaries to receive duty-free or reduced tariff benefits under bilateral or regional FTAs, trade preference programs (such as the Generalized System of Preferences), and other special import programs. Preferential rules of origin are specific to each FTA, which means that they vary from agreement to agreement and preference to preference. This report deals with ROO in three parts. First, we describe in more detail the reasons that country of origin rules are important and briefly describe U.S. laws and methods that provide direction in making these determinations. Second, we discuss briefly some of the more controversial issues involving rules of origin, including the apparently subjective nature of some CBP origin determinations, and the effects of the global manufacturing process on ROO. Third, we conclude with some alternatives and options that Congress could consider that might assist in simplifying the process. This report will be updated as events warrant

Beyond Risk Profiling: Achieving better investment outcomes for consumers and industry

In the wake of the Retail Distribution Review, there remain fundamental questions about how best to support consumers to make sound investment decisions, particularly those with modest amounts of money to invest, for whom a poor investment decision may have a disproportionate adverse impact. The advent of new pension freedoms from April 2015, which give people more choice and flexibility about how they use their retirement savings, adds further impetus to the issue. To help inform policy and practice on this important subject, in June 2015 we brought together consumer and industry experts to explore possible new approaches to improve risk profiling and investment decision-making

Organic farming and multicriteria decisions: An economic survey

Organic food production is a sphere where decision making is multi-facetted and complex. This applies to producers, political decision makers and consumers alike. This paper provides an overview of the economic methods that can aid such multi criteria decision making. We first provide an outline of the many different Multi-Criteria Analysis (MCA) techniques available and their relative advantages and disadvantages. In addition, theoretical and practical problems related to the use of Cost-Benefit Analysis (CBA) and MCA respectively are briefly discussed. We then review the MCA literature on case studies on organic farming. Based on this review we provide directional markers for future research where MCA may possibly be applied and adapted in order to provide useful knowledge and support for decision makers in the context of organic farming

Investment-Linked Takaful Plan Patronage: Evidence From Malaysia

Investment-linked Takaful is a recent innovation introduced in Malaysia. This study focuses on Investment-linked takaful plan selection in Malaysia. We have used a self-administered questionnaire to collect data from 143 respondents from the Klang Valley area. Data collected through the survey was analyzed through descriptive statistics, correlation and regression analysis. Results indicate that fee payment and benefits play a significant role in Takaful operator selection while coverage and benefits affect the investment-linked product selection in Malaysia. This study is unique as it provides empirical evidence on the investment-linked takaful investment which is limited in supply. Results provided by this study can be useful for takaful operators in designing the most appropriate investment-linked product for attracting customers

Approach towards an operational tool to apply institutional analysis for the assessment of policy feasibility within SEAMLESS-IF

Environmental Economics and Policy,

Social priorities of internal banking assortment (products) policy

Motivations of social responsibility, social orientation and social priorities are described in the context of special quasi social bank status and other credit organizations, Russian historic traditions, and specific peculiarities of bank management. Subjects and objects of social priorities, their concurring and alternative interests, goals and tasks are defined and explained on the basis of the analysis of theoretical and methodological insights, research and ranking of statistic data. Subjective, objective (institutional) and process concentrations of social priorities in bank management are framed. Benchmarks of social priorities, their levels and nominations are marked out. This work emphasizes and describes with relevant explanations such areas of socially oriented activity of banks as provision of banking services to enterprises and organizations of social areas and those that are entirely or partially socially oriented, financial and/or organizational participation in proper socially motivated events, financial and/or organizational participation in social projects of third parties including specialized ones, creation and selling of banking socially oriented products. Certain weak points and inaccuracy in implementing social projects by Russian banks are revealed. The subject matter and structure of internal banking policy, factors and terms and conditions that have an impact on its parameters concretized to the peculiarities of the assortment (products) policy are regarded. The formulated areas of social priorities are regarded as an optimized complex. On its basis, social components of preferences, limitations and prohibitions of the internal banking assortment (products) banking policy are developed and recommended.peer-reviewe

Measuring efficiency when market prices are subject to adverse selection

In perfectly competitive markets, prices aggregate inputs and outputs into a money metric that allows production plans to be ranked by their profitability. When informational asymmetries in competitive markets lead to adverse selection, prices in these markets assume an additional role that conveys information about product quality. In the case of banking production, quality is linked to risk because prices are linked to credit quality. ; The problem of efficiency measurement is complicated by the additional role because quality varies with price and price is a decision variable of firms operating in these markets. The effect of these endogenous components of prices on financial performance is illustrated with a production-based model and a market-value model that generate "best- practice" frontiers. Unlike the standard profit function's frontier, these frontiers are not conditioned on prices so that they compare the financial performance of firms with different quality-linked prices. Hence, they identify the most efficient pricing strategies as well as the most efficient production plans. ; These two alternative models for measuring efficiency are employed to study the efficiency of highest level bank holding companies in the United States in 1994. The contractural interest rates these banks obtain on their loans and other assets are shown to influence their expected profit, profit risk, market value, and efficiency.Banks and banking - Costs

International Trade: Rules of Origin

[Excerpt] Recent trade policy issues have pointed to the framework used by the United States and other countries to regulate imports, including the process of determining country of origin using “rules of origin” (ROO). Such rules can be very simple, noncontroversial tools of international trade as long as all of the parts of a product are manufactured and assembled primarily in one country. However, when a finished product’s component parts originate in many countries—as is often the case in today’s global trading environment—determining origin can be a very complex, sometimes subjective, and time-consuming process. This report first provides a general overview of the U.S. ROO system, including its implementation as it applies to manufactured imports. Second, advantages and disadvantages of the ROO schemes as implemented by the United States are also discussed. Third, the report illustrates ways in which the application of the rules of origin system can lead to country of origin determinations that could be inconsistent with U.S. policy objectives or goals, or encourage businesses to circumvent them. The report concludes with some options that Congress could consider in order to improve the ROO process