AGGREGATE DEMAND AND TECHNOLOGICAL CHANGES: A MACRO-ECONOMIC MODEL OF INDUCED INNOVATIONS

Research and Development/Tech Change/Emerging Technologies,

INVESTORS’ DECISION TO TRADE STOCKS – AN EXPERIMENTAL STUDY

This paper experimentally examines the behavior of investors when buying and selling stocks. This behavior was tested under different conditions, among them restrictions on asset holdings or different information conditions. Basic financial theory suggests that subjects buy and sell according to expectations regarding the future prices of assets. On the other hand, behavioral biases, such as the disposition effect, suggest that subjects are affected by past performance of assets. In a series of experiments, subjects were asked to allocate a given endowment among six assets. All the assets had the same normal distribution. The results show that when subjects were not restricted regarding the number of assets they were allowed to hold and were given information only on the asset they hold, the holding time for losing and winning assets was the same, indicating that there was no effect of past performance. On the other hand, when subjects were required to hold three assets at all times and replace one asset on each round, they tended to sell losing assets too soon and hold winning assets too long. The results also show that subjects who are given information on market returns tend to sell winning assets (relatively to the market) too soon and hold losing assets too long.Behavioral finance, Disposition effect, experimental economics, momentum, trading.

SUBJECTIVE EVALUATION OF DELAYED RISKY OUTCOMES: AN EXPERIMENTAL APPROACH

This paper uses experimental data to estimate the pure time discount rate for different lengths of times for riskless assets (bonds), and risky assets (delayed lotteries). In moving from the present time (t = 0) to the future, there is a very sharp decline (jump) in the subjective price of the assets for both buy and sell transactions. This jump corresponds to a large increase in the discount rate for the first period and a much lower discount rate for later periods (forward rate). The findings cast doubt on the relevance of the hyperbolic function approach to discounting.Willingness to accept (WTA); Willingness to pay (WTP);Intertemporal choice, Decision-making.

UNDER-DIVERSIFICATION AND THE ROLE OF BEST REPLY TO PATTERN

Three experiments are presented that compare alternative explanations to the coexistence of risk aversion and under-diversification in investment decisions. The participants were asked to select one of several assets under two feedback conditions. In each case, one asset was a weighted combination of the other assets, allowing for lower volatility. The frequency of choice of the composite asset was highly sensitive to feedback condition. The composite asset was the least popular asset when the feedback included information concerning forgone payoffs, and increased in frequency when the feedback was limited to the obtained payoff. These results support the assertion that under-diversification can be a product of learning from feedback and in particular best reply to pattern.Risk; Diversification; Learning

Decision-Making and the Newsvendor Problem – An Experimental Study

This paper investigates repetitive purchase decisions of perishable items in the face of uncertain demand (the newsvendor problem). The experimental design includes: high, or low profit levels; and uniform, or normal demand distributions. The results show that in all cases both learning and convergence occur and are effected by: (1) the mean demand; (2) the order-size of the maximal expected profit; and (3) the demand level of the immediately preceding round. In all cases of the experimental design, the purchase order converges to a value between the mean demand and the quantity for maximizing the expected profit.Inventory, Learning, Behavior, Management, Optimization

A re-examination of value-creation through strategic alliances

This paper uses a sample of 335 firms participating in strategic alliances in order to re-examine the value creation through strategic alliances. We show that the immediate positive response of stock markets to new strategic alliances is followed by negative abnormal returns. Twenty days after announcements, cumulative positive abnormal return is only evident for the firms with the highest stock market’s response to the announcement. We relate the positive abnormal returns reported in previous research to the presence of short-run over-reaction in stock markets and conclude in the market’s ability to identify the more valuable alliances.Strategic alliance; over-reaction; momentum

The role of personality factors in repeated route choice behavior: behavioral economics perspective

This paper is based on an in-laboratory experiment and aims to explore the impact of various personality factors on route-choice behavior in the presence of partial pre-trip travel time information. Specifically, these factors are geographic ability and sensation seeking characteristics. The results show that while the variables related to perceived and realized travel times are important, the personality factors are also significant. Drivers with lower geographic abilities tended to use the main route more often and to switch their routes less often, compared to those with higher capabilities. Drivers who scored higher on sensation seeking tended to switch their routes more frequently, compared to other drivers

Rentabilidad inicial y anual en ofertas públicas de activos en Israel durante los años 1998-2006

Contrary to findings reported in the extant IPO literature between 2001 and 2006, average first-day returns in Israel’s stock market resulted in a deficit return of −1.2% and the average one-year return resulted in an excess return of 10.5%. Estimating the relationship between yields and various explanatory variables, we found that daily yield is positively affected by excess demand and total equity capital, whilst negatively correlated with underwriting commissions, price of offerings and the total sum raised. The one-year return was found to be positively correlated with deficient underwriting and negatively correlated with first-day return and return on capitalContrariamente a las conclusiones halladas en la literatura existente sobre las Ofertas Públicas Iniciales entre 2001 y 2006, el promedio de rentabilidad el primer día en la Bolsa de Valores de Israel resultó en un déficit de −1,2%, mientas que el promedio anual de rentabilidad fue del 10,5%. Estimando la relación entre los rendimientos y las diversas variables explicativas, llegamos a la conclusión de que el rendimiento inicial está afectado positivamente por el exceso de demanda y el capital total, y correlacionado negativamente con las comisiones de suscripción, el precio de las ofertas y el importe total recaudado. Se demostró que la rentabilidad anual estaba correlacionada positivamente con la suscripción deficiente y negativamente con la rentabilidad inicial y la rentabilidad sobre el capita