The power of priors: How confirmation bias impacts market prices

One form of confirmation bias is the tendency for people to ignore information that is inconsistent with their current beliefs. While confirmation bias is the subject of both analytical models and experiments in accounting and finance, its effect on market prices has not been studied due to limitations associated with traditional financial markets. In eleven real-money movie box office prediction markets, confirmation bias was induced in all traders via the explanation effect, i.e. a requirement to submit a box office forecast and an explanation prior to trading. When all traders are subject to confirmation bias, market prices do not accurately reflect new, value-relevant information. However, in comparable a set of seven real-money movie prediction markets that included both traders who have not been subject to explanation requirement and those who have, we find efficient incorporation of new information into market prices. This study extends our knowledge of the conditions under which individual trader biases affect market prices and provides potential insights into open questions about forecasting errors among financial analysts.

Private Information, Overconfidence and Trader Returns in Prediction Markets

In lab experiments on the value of information in financial markets, groups of “insiders” are randomly chosen to receive perfect information. However, in typical (non-experimental) financial markets, investors often engage in extensive fundamental analysis, a process which may result in over-confidence in one’s private information. In this study, we examine trading volume, prices and trader returns in a set of four real money prediction markets where the values of securities are tied to a movie’s box office performance. Before the markets opened, every trader submitted a detailed forecast of the movie’s future performance. Therefore, all traders have self-generated private information, the accuracy of which can only be known ex-post.            As expected, the volume and timing of trading were consistent with over-confidence. In three of the four markets, contract prices were consistent with the prior information equilibrium. In those three markets, traders whose forecast was associated with the winning contract had significantly higher returns than traders whose forecasts suggested that another contract would pay off. In the other market, there were no significant differences in returns across trader groups. This research suggests that when traders are overconfident and trade accordingly, there can value to being better informed if the information is accurate.

36 degree step size of proton-driven c-ring rotation in FoF1-ATP synthase

Synthesis of the biological "energy currency molecule" adenosine triphosphate ATP is accomplished by FoF1-ATP synthase. In the plasma membrane of Escherichia coli, proton-driven rotation of a ring of 10 c subunits in the Fo motor powers catalysis in the F1 motor. While F1 uses 120 degree stepping, Fo models predict a step-by-step rotation of c subunits 36 degree at a time, which is here demonstrated by single-molecule fluorescence resonance energy transfer.Comment: 8 pages, 1 figur

INCENTIVE AND ACCURACY ISSUES IN MOVIE PREDICTION MARKETS

We compare the forecasts of nineteen movie box office results from real money (Iowa Electronic Market) and play money (Hollywood Stock Exchange) prediction markets. The forecasts were not significantly different, contrary to recent research on incentives and prediction market accuracy. Proponents of play money incentives suggest that (play) wealth concentrates in the hands of knowledgeable traders over time. This should lead to improved accuracy over time. A longitudinal analysis of results (1999-2002) from the play money Hollywood Stock Exchange fails to find significant improvement over time. This may be due to an increased number of less knowledgeable traders who, nevertheless, provide liquidity in the market

Can Investing Diaries be Hazardous to Your Financial Health?

Business writers and academics have suggested keeping an investing diary to avoid hindsight bias. In the diary, investors justify their predictions of future events, e.g., “This stock will go up because…” Eliminating hindsight bias should improve future returns. However, psychological research on the “explanation effect” suggests that justifying one’s predictions in writing induces overconfidence and, by consequence, reduces current returns. We test these propositions in a set of prediction markets populated by two types of traders: forecasters who completed a required investing diary task and non-forecasters who did not. The portfolios of forecasters were significantly over-invested in securities associated with the forecaster’s prediction. This is consistent with prior psychological research and a clear sign of investor over-confidence. We further find that forecasters with accurate predictions have higher returns than those with inaccurate predictions. However, the returns for forecasters with inaccurate predictions were generally no worse than the returns of the non-forecasters. Our results suggest that while keeping an investing diary may lead to biased portfolios, it does not have an overall negative effect on current returns. Therefore, contrary to expectations, there is not a trade-off between the long-term and short-term effects of an investing diary

Differential gene expression between fall- and spring-run Chinook salmon assessed by long serial analysis of gene expression

Author Posting. © American Fisheries Society, 2008. This article is posted here by permission of American Fisheries Society for personal use, not for redistribution. The definitive version was published in Transactions of the American Fisheries Society 137 (2008): 1378–1388, doi:10.1577/T07-222.1.Of all Pacific salmonids, Chinook salmon Oncorhynchus tshawytscha display the greatest variability in return times to freshwater. The molecular mechanisms of these differential return times have not been well described. Current methods, such as long serial analysis of gene expression (LongSAGE) and microarrays, allow gene expression to be analyzed for thousands of genes simultaneously. To investigate whether differential gene expression is observed between fall- and spring-run Chinook salmon from California's Central Valley, LongSAGE libraries were constructed. Three libraries containing between 25,512 and 29,372 sequenced tags (21 base pairs/tag) were generated using messenger RNA from the brains of adult Chinook salmon returning in fall and spring and from one ocean-caught Chinook salmon. Tags were annotated to genes using complementary DNA libraries from Atlantic salmon Salmo salar and rainbow trout O. mykiss. Differentially expressed genes, as estimated by differences in the number of sequence tags, were found in all pairwise comparisons of libraries (freshwater versus saltwater = 40 genes; fall versus spring = 11 genes; and spawning versus nonspawning = 51 genes). The gene for ependymin, an extracellular glycoprotein involved in behavioral plasticity in fish, exhibited the most differential expression among the three groupings. Reverse transcription polymerase chain reaction analysis verified the differential expression of ependymin between the fall- and spring-run samples. These LongSAGE libraries, the first reported for Chinook salmon, provide a window of the transcriptional changes during Chinook salmon return migration to freshwater and spawning and increase the amount of expressed sequence data.This work was supported with a grant from the California Department of Water Resources awarded to M.A.B.; J.C.B. received additional funding from the North Umpqua Foundation, Roseburg, Oregon

Long serial analysis of gene expression for gene discovery and transcriptome profiling in the widespread marine coccolithophore Emiliania huxleyi

Author Posting. © American Society for Microbiology, 2006. This article is posted here by permission of American Society for Microbiology for personal use, not for redistribution. The definitive version was published in Applied and Environmental Microbiology 72 (2006): 252-260, doi:10.1128/AEM.72.1.252-260.2006.The abundant and widespread coccolithophore Emiliania huxleyi plays an important role in mediating CO2 exchange between the ocean and the atmosphere through its impact on marine photosynthesis and calcification. Here, we use long serial analysis of gene expression (SAGE) to identify E. huxleyi genes responsive to nitrogen (N) or phosphorus (P) starvation. Long SAGE is an elegant approach for examining quantitative and comprehensive gene expression patterns without a priori knowledge of gene sequences via the detection of 21-bp nucleotide sequence tags. E. huxleyi appears to have a robust transcriptional-level response to macronutrient deficiency, with 42 tags uniquely present or up-regulated twofold or greater in the N-starved library and 128 tags uniquely present or up-regulated twofold or greater in the P-starved library. The expression patterns of several tags were validated with reverse transcriptase PCR. Roughly 48% of these differentially expressed tags could be mapped to publicly available genomic or expressed sequence tag (EST) sequence data. For example, in the P-starved library a number of the tags mapped to genes with a role in P scavenging, including a putative phosphate-repressible permease and a putative polyphosphate synthetase. In short, the long SAGE analyses have (i) identified many new differentially regulated gene sequences, (ii) assigned regulation data to EST sequences with no database homology and unknown function, and (iii) highlighted previously uncharacterized aspects of E. huxleyi N and P physiology. To this end, our long SAGE libraries provide a new public resource for gene discovery and transcriptional analysis in this biogeochemically important marine organism.This work was supported by the Woods Hole Oceanographic Institution Ocean Life Institute, the J. Lamar Worzel Assistant Scientist Fund, and the Frank and Lisina Hoch Endowed Fund. A.G.M., S.R.B., and M.J.C. were supported in part by the Marine Biological Laboratory's Program in Global Infectious Diseases, funded by the Ellison Medical Foundation. Computational resources were provided by the Josephine Bay Paul Center for Comparative Molecular Biology and Evolution (Marine Biological Laboratory) through funds provided by the W. M. Keck Foundation and the G. Unger Vetlesen Foundation

RegTransBase—a database of regulatory sequences and interactions in a wide range of prokaryotic genomes

RegTransBase is a manually curated database of regulatory interactions in prokaryotes that captures the knowledge in public scientific literature using a controlled vocabulary. Although several databases describing interactions between regulatory proteins and their binding sites are already being maintained, they either focus mostly on the model organisms Escherichia coli and Bacillus subtilis or are entirely computationally derived. RegTransBase describes a large number of regulatory interactions reported in many organisms and contains the following types of experimental data: the activation or repression of transcription by an identified direct regulator, determining the transcriptional regulatory function of a protein (or RNA) directly binding to DNA (RNA), mapping or prediction of a binding site for a regulatory protein and characterization of regulatory mutations. Currently, RegTransBase content is derived from about 3000 relevant articles describing over 7000 experiments in relation to 128 microbes. It contains data on the regulation of about 7500 genes and evidence for 6500 interactions with 650 regulators. RegTransBase also contains manually created position weight matrices (PWM) that can be used to identify candidate regulatory sites in over 60 species. RegTransBase is available at

Three-parameter Lorentz-violating texture for neutrino mixing

A three-parameter model of neutrino oscillations based on a simple Lorentz- and CPT-violating texture is presented. The model is consistent with established data and naturally generates low-energy and neutrino-antineutrino anomalies of the MiniBooNE type. A one-parameter extension incorporates the MINOS anomaly, while a simple texture enhancement accommodates the LSND signal.Comment: 5 pages, accepted for publication in Physics Letters

Turnover of variant surface glycoprotein in Trypanosoma brucei is a bimodal process

This work was supported by United States Public Health Service grant R01 AI035739 and funds from the Jacobs School of Medicine and Biomedical Sciences to J.D.B. and from United States Public Health Service grant 1S10OD021719-01A1 to the University of Georgia, which purchased the ImageStreamX Mk II. This work was also supported by the Wellcome Trust (grant 094476/Z/10/Z) for funding the purchase of the TripleTOF 5600 mass spectrometer at the BSRC Mass Spectrometry and Proteomics Facility.African trypanosomes utilize glycosylphosphatidylinositol (GPI)-anchored variant surface glycoprotein (VSG) to evade the host immune system. VSG turnover is thought to be mediated via cleavage of the GPI anchor by endogenous GPI-specific phospholipase C (GPI-PLC). However, GPI-PLC is topologically sequestered from VSG substrates in intact cells. Recently, A. J. Szempruch, S. E. Sykes, R. Kieft, L. Dennison, et al. (Cell 164:246-257, 2016, https://doi.org/10.1016/j.cell.2015.11.051) demonstrated the release of nanotubes that septate to form free VSG+ extracellular vesicles (EVs). Here, we evaluated the relative contributions of GPI hydrolysis and EV formation to VSG turnover in wild-type (WT) and GPI-PLC null cells. The turnover rate of VSG was consistent with prior measurements (half-life [t1/2] of ∼26 h) but dropped significantly in the absence of GPI-PLC (t1/2 of ∼36 h). Ectopic complementation restored normal turnover rates, confirming the role of GPI-PLC in turnover. However, physical characterization of shed VSG in WT cells indicated that at least 50% is released directly from cell membranes with intact GPI anchors. Shedding of EVs plays an insignificant role in total VSG turnover in both WT and null cells. In additional studies, GPI-PLC was found to have no role in biosynthetic and endocytic trafficking to the lysosome but did influence the rate of receptor-mediated endocytosis. These results indicate that VSG turnover is a bimodal process involving both direct shedding and GPI hydrolysis. IMPORTANCE African trypanosomes, the protozoan agent of human African trypanosomaisis, avoid the host immune system by switching expression of the variant surface glycoprotein (VSG). VSG is a long-lived protein that has long been thought to be turned over by hydrolysis of its glycolipid membrane anchor. Recent work demonstrating the shedding of VSG-containing extracellular vesicles has led us to reinvestigate the mode of VSG turnover. We found that VSG is shed in part by glycolipid hydrolysis but also in approximately equal part by direct shedding of protein with intact lipid anchors. Shedding of exocytic vesicles made a very minor contribution to overall VSG turnover. These results indicate that VSG turnover is a bimodal process and significantly alter our understanding of the "life cycle" of this critical virulence factor.Publisher PDFPeer reviewe