Optimal Expectations

This paper introduces a tractable, structural model of subjective beliefs. Since agents that plan for the future care about expected future utility flows, current felicity can be increased by believing that better outcomes are more likely. On the other hand, expectations that are biased towards optimism worsen decision making, leading to poorer realized outcomes on average. Optimal expectations balance these forces by maximizing the total well-being of an agent over time. We apply our framework of optimal expectations to three different economic settings. In a portfolio choice problem, agents overestimate the return of their investment and underdiversify. In general equilibrium, agents' prior beliefs are endogenously heterogeneous, leading to gambling. Second, in a consumption-saving problem with stochastic income, agents are both overconfident and overoptimistic, and consume more than implied by rational beliefs early in life. Third, in choosing when to undertake a single task with an uncertain cost, agents exhibit several features of procrastination, including regret, intertemporal preference reversal, and a greater readiness to accept commitment.expectations formation, beliefs, overconfidence

Optimal Expectations

This paper introduces a tractable, structural model of subjective beliefs. Since agents that plan for the future care about expected future utility flows, current felicity can be increased by believing that better outcomes are more likely. On the other hand, expectations that are biased towards optimism worsen decision making, leading to poorer realized outcomes on average. Optimal expectations balance these forces by maximizing the total well-being of an agent over time. We apply our framework of optimal expectations to three different economic settings. In a portfolio choice problem, agents overestimate the return of their investment and under diversify. In general equilibrium, agents’ prior beliefs are endogenously heterogeneous, leading to gambling. Second, in a consumption-saving problem with stochastic income, agents are both overconfident and overoptimistic, and consume more than implied by rational beliefs early in life. Third, in choosing when to undertake a single task with an uncertain cost, agents exhibit several features of procrastination, including regret, intertemporal preference, reversal, and a greater readiness to accept commitment.Expectations formation, beliefs, overconfidence, wishful thinking, procrastination, gambling

Resummation Improved Rapidity Spectrum for Gluon Fusion Higgs Production

Gluon-induced processes such as Higgs production typically exhibit large perturbative corrections. These partially arise from large virtual corrections to the gluon form factor, which at timelike momentum transfer contains Sudakov logarithms evaluated at negative arguments $\ln^2(-1) = -\pi^2$. It has been observed that resumming these terms in the timelike form factor leads to a much improved perturbative convergence for the total cross section. We discuss how to consistently incorporate the resummed form factor into the perturbative predictions for generic cross sections differential in the Born kinematics, including in particular the Higgs rapidity spectrum. We verify that this indeed improves the perturbative convergence, leading to smaller and more reliable perturbative uncertainties, and that this is not affected by cancellations between resummed and unresummed contributions. Combining both fixed-order and resummation uncertainties, the perturbative uncertainty for the total cross section at N$^3$LO$+$N$^3$LL$^\prime_\varphi$ is about a factor of two smaller than at N$^3$LO. The perturbative uncertainty of the rapidity spectrum at NNLO$+$NNLL$^\prime_\varphi$ is similarly reduced compared to NNLO. We also study the analogous resummation for quark-induced processes, namely Higgs production through bottom quark annihilation and the Drell-Yan rapidity spectrum. For the former the resummation leads to a small improvement, while for the latter it confirms the already small uncertainties of the fixed-order predictions.Comment: 30 pages + 17 pages in Appendices, 10 figures; v2: journal version; references added, discussed individual partonic channels for Drell-Ya

Optimal Beliefs, Asset Prices, and the Preference for Skewed Returns

Human beings want to believe that good outcomes in the future are more likely, but also want to make good decisions that increase average outcomes in the future. We consider a general equilibrium model with complete markets and show that when investors hold beliefs that optimally balance these two incentives, portfolio holdings and asset prices match six observed patterns: (i) because the cost of biased beliefs are typically second-order, investors typically hold biased assessments of probabilities and so are not perfectly diversified according to objective metrics; (ii) because the costs of biased beliefs temper these biases, the utility costs of the lack of diversification are limited; (iii) because there is a complementarity between believing a state more likely and purchasing more of the asset that pays off in that state, investors over-invest in only one Arrow-Debreu security and smooth their consumption well across the remaining states; (iv) because different households can settle on different states to be optimistic about, optimal portfolios of ex ante identical investors can be heterogeneous; (v) because low-price and low-probability states are the cheapest states to buy consumption in, overoptimism about these states distorts consumption the least in the rest of the states, so that investors tend to overinvest in the most skewed securities; (vi) finally, because investors with optimal expectations have higher demand for more skewed assets, ceteris paribus, more skewed asset can have lower average returns.

Counter-Intuitive Vacuum-Stimulated Raman Scattering

Vacuum-stimulated Raman scattering in strongly coupled atom-cavity systems allows one to generate free-running single photon pulses on demand. Most properties of the emitted photons are well defined, provided spontaneous emission processes do not contribute. Therefore, electronic excitation of the atom must not occur, which is assured for a system adiabatically following a dark state during the photon-generation process. We experimentally investigate the conditions that must be met for adiabatic following in a time-of-flight driven system, with atoms passing through a cavity and a pump beam oriented transverse to the cavity axis. From our results, we infer the optimal intensity and relative pump-beam position with respect to the cavity axis.Comment: 4 pages, 4 figure

Origin of lymph node-derived lymphocytes in human hepatic allografts

Hepatic allograft-derived lymph nodes were examined in the post-transplant period on order to determine the origin of lymphocytes and structural elements of the lymph node. Histologic assessment and immunohistochemical studies verified that T-cell infiltration of donor lymph nodes by recipient-derived lymphocytes occurred early in the post-transplant period. These T cells bore T-cell activation markers, e.g. TAC receptor and HLA-DR antigens. In addition, functional analysis demonstrated alloreactive T cells in secondary proliferation assays. The pattern of alloreactivity in these assays was dependent upon the phenotypic make-up (and therefore origin) of the lymphocytes within the lymph node. A gradual shift in predominance of donor-derived lymphocytes to recipient-derived lymphocytes occurred, but even late in the post-transplant course the stromal elements and a residium of lymphocytes within the lymph nodes continued to bear donor HLA antigens. The possible role of these 'passenger' lymphocytes in allograft immunity is discussed

Sneutrino LSPs in R-parity violating minimal supergravity models

We consider the minimal supergravity model (mSUGRA) with one additional R-parity violating operator at the GUT scale. The superparticles mass spectra at the weak scale are generally altered due to the presence of the R-parity violating coupling in the renormalization group equations. We show that a lepton number violating coupling at the GUT scale can lead to a sneutrino as the lightest supersymmetric particle (LSP) in a large region of parameter space consistent with the muon anomalous magnetic moment and other precision measurements. We also give characteristic collider signatures at the LHC.Comment: 3 pages, 3 figures, to appear in the proceedings of SUSY08, Seoul, Kore

Reaction-diffusion fronts with inhomogeneous initial conditions

Properties of reaction zones resulting from A+B -> C type reaction-diffusion processes are investigated by analytical and numerical methods. The reagents A and B are separated initially and, in addition, there is an initial macroscopic inhomogeneity in the distribution of the B species. For simple two-dimensional geometries, exact analytical results are presented for the time-evolution of the geometric shape of the front. We also show using cellular automata simulations that the fluctuations can be neglected both in the shape and in the width of the front.Comment: 11 pages, 3 figures, submitted to J. Phys.