Optimal Mortgage Refinancing: A Closed Form Solution

We derive the first closed-form optimal refinancing rule: Refinance when the current mortgage interest rate falls below the original rate by at least $\frac{1}{ψ}$[φ + W (− exp (−φ))]. In this formula W(.) is the Lambert W-function, ψ = $\frac{2 (ρ + λ)}{σ}$, φ = 1 + ψ (ρ + λ)$\frac{κ/M}{(1 − τ )}$, ρ is the real discount rate, λ is the expected real rate of exogenous mortgage repayment, σ is the standard deviation of the mortgage rate, κ/M is the ratio of the tax-adjusted refinancing cost and the remaining mortgage value, and τ is the marginal tax rate. This expression is derived by solving a tractable class of refinancing problems. Our quantitative results closely match those reported by researchers using numerical methods.Economic

Optimality and distortionary lobbying: regulating tobacco consumption

We examine policies directed at regulating tobacco consumption through three types of instruments: (i) an excise tax hindering consumption by increasing the price of cigarettes, (ii) prevention programs helping consumers to make choices that are more time consistent when trading-off the current pleasure from smoking and its future health harms, and (iii) smoking bans directly restricting consumption. First, on normative grounds, we focus on the optimal design of public policies maximizing the economy’s surplus. Second, in a positive perspective, we investigate how the lobbying activities of the tobacco industry, of smokers, and of anti-tobacco organizations may distort government intervention

Understanding time-inconsistent heterogeneous preferences in economics and finance:A practice theory approach

This paper introduces an innovative framework for decision making by individuals with inconsistent preferences. Practices, associations of individuals with a preference set shared by its members, provide context and unify preferences across an economy so that decision-makers are situated in social and economic structures. Our framework models the time evolution of certain attributes, emerging from the practice framework, that govern individuals’ decisions and their intertemporal variation. A novel feature is that preferences are able to rank other preference sets without the need to aggregate them. Instead, the selection of a preference set is treated as a decision in its own right. Our framework explains decision making paradoxes such as the disposition effect and agency cost considerations that are frequently encountered in the behavioural finance and economics literature

The Fourth Law of Behavior Genetics

Behavior genetics is the study of the relationship between genetic variation and psychological traits. Turkheimer (2000) proposed “Three Laws of Behavior Genetics” based on empirical regularities observed in studies of twins and other kinships. On the basis of molecular studies that have measured DNA variation directly, we propose a Fourth Law of Behavior Genetics: “A typical human behavioral trait is associated with very many genetic variants, each of which accounts for a very small percentage of the behavioral variability.” This law explains several consistent patterns in the results of gene-discovery studies, including the failure of candidate-gene studies to robustly replicate, the need for genome-wide association studies (and why such studies have a much stronger replication record), and the crucial importance of extremely large samples in these endeavors. We review the evidence in favor of the Fourth Law and discuss its implications for the design and interpretation of gene-behavior research.Economic

Money Earlier or Later? Simple Heuristics Explain Intertemporal Choices Better Than Delay Discounting Does

Heuristic models have been proposed for many domains involving choice. We conducted an out-of-sample, cross-validated comparison of heuristic models of intertemporal choice (which can account for many of the known intertemporal choice anomalies) and discounting models. Heuristic models outperformed traditional utility-discounting models, including models of exponential and hyperbolic discounting. The best-performing models predicted choices by using a weighted average of absolute differences and relative percentage differences of the attributes of the goods in a choice set. We concluded that heuristic models explain time-money trade-off choices in experiments better than do utility-discounting models.Economic

Genetic variants associated with subjective well-being, depressive symptoms, and neuroticism identified through genome-wide analyses

Very few genetic variants have been associated with depression and neuroticism, likely because of limitations on sample size in previous studies. Subjective well-being, a phenotype that is genetically correlated with both of these traits, has not yet been studied with genome-wide data. We conducted genome-wide association studies of three phenotypes: subjective well-being (n = 298,420), depressive symptoms (n = 161,460), and neuroticism (n = 170,911). We identify 3 variants associated with subjective well-being, 2 variants associated with depressive symptoms, and 11 variants associated with neuroticism, including 2 inversion polymorphisms. The two loci associated with depressive symptoms replicate in an independent depression sample. Joint analyses that exploit the high genetic correlations between the phenotypes (|ρ^| ≈ 0.8) strengthen the overall credibility of the findings and allow us to identify additional variants. Across our phenotypes, loci regulating expression in central nervous system and adrenal or pancreas tissues are strongly enriched for association.</p

Phase control and measurement in digital microscopy

The ongoing merger of the digital and optical components of the modern microscope is creating opportunities for new measurement techniques, along with new challenges for optical modelling. This thesis investigates several such opportunities and challenges which are particularly relevant to biomedical imaging. Fourier optics is used throughout the thesis as the underlying conceptual model, with a particular emphasis on three--dimensional Fourier optics. A new challenge for optical modelling provided by digital microscopy is the relaxation of traditional symmetry constraints on optical design. An extension of optical transfer function theory to deal with arbitrary lens pupil functions is presented in this thesis. This is used to chart the 3D vectorial structure of the spatial frequency spectrum of the intensity in the focal region of a high aperture lens when illuminated by linearly polarised beam. Wavefront coding has been used successfully in paraxial imaging systems to extend the depth of field. This is achieved by controlling the pupil phase with a cubic phase mask, and thereby balancing optical behaviour with digital processing. In this thesis I present a high aperture vectorial model for focusing with a cubic phase mask, and compare it with results calculated using the paraxial approximation. The effect of a refractive index change is also explored. High aperture measurements of the point spread function are reported, along with experimental confirmation of high aperture extended depth of field imaging of a biological specimen. Differential interference contrast is a popular method for imaging phase changes in otherwise transparent biological specimens. In this thesis I report on a new isotropic algorithm for retrieving the phase from differential interference contrast images of the phase gradient, using phase shifting, two directions of shear, and non--iterative Fourier phase integration incorporating a modified spiral phase transform. This method does not assume that the specimen has a constant amplitude. A simulation is presented which demonstrates good agreement between the retrieved phase and the phase of the simulated object, with excellent immunity to imaging noise

Intertemporal Efficiency and Equity Under Hyperbolic Preferences. Ex Ante Versus Ex Post Procrastination

In this paper I extend the well known result that a hyperbolically discounting agent postpones costs into the future. If society has hyperbolic inter-temporal preferences, it may be optimal from an ex ante point of view to postpone structural change from a polluting to a non polluting production sector into the future (ex ante procrastination). The consequences of ex ante procrastination are discussed for three different behavioral patterns. I show that, depending on the assumed behavioral regime, ex ante procrastination may lead to ex post procrastination, i.e. de facto no investment in the non polluting sector is undertaken over the whole time horizon, although investment was optimal from an ex ante point of view. Furthermore, the ex post implemented investment plan may be inefficient if it is not dictatorial. Hence, in the case of hyperbolic preferences there is a potential trade-off between inter-temporal efficiency and equity

Credit Card Debt and Payment Use

Approximately half of credit card holders in the United States regularly carry unpaid credit card debt. These so-called revolvers exhibit payment behavior that differs from that of those who repay their entire credit card balance every month. Previous literature has focused on the adoption of debit cards by people who carry credit card balances, but so far there has been no empirical analysis exploring the relationship between revolving behavior and patterns of payment use, such as substitution away from credit cards to other payment methods. Using data collected in the 2005 Survey of Consumer Payment Preferences, we explore the relationship between revolving credit card balances and payment use. We find that credit card revolvers are significantly more likely to use debit and less likely to use credit than convenience users who repay their balances each month. There is no significant difference between these two types of credit card users in their use of check or cash. The two groups differ in their perceptions of payments as well as in their payment behavior: revolvers are significantly less likely to view debit as superior with respect to ease of use and acceptability, but more likely to see debit as superior with respect to control over money and budgeting