27
ago
14

Solar Flares and Risk Management for Investors

On 1 September 1859, the sun emitted a large solar flare releasing approximately 6 × 1025 joules of energy (i.e., a massive amount). Telegraph systems all over the world — which were connected by copper wires — failed, in some cases giving telegraph operators electric shocks; in other cases, cascades of sparks spontaneously erupted from telegraph lines. Amazingly, some telegraph equipment that wasn’t plugged in continued to receive messages. In the days that followed the solar storm, which came to be known as the Carrington Event, auroras were seen around the world — including as far south as the Caribbean and Ecuador. Fireballs were spotted in the sky. Equipment connected to this “Victorian internet” caught fire. What might happen to today’s internet if the sun were to emit another solar flare? What does this mean for risk management?

On 23 July 2012, there was a similar coronal mass ejection (CME) released by the sun, only this time the CME narrowly missed Earth. Had the CME occurred just seven days earlier, it would have directly hit planet Earth. According the the US Geological Survey, such an event has a 6%–7% chance of happening in the next 10 years. NASA scientist Daniel Baker calculates that there is a 12% chance that the earth will encounter another Carrington Event within the next 10 years.

Source: blogs.cfainstitute.org

See on Scoop.itBounded Rationality and Beyond

27
ago
14

Daniel McFadden: Understanding better how people really make choices

The way our brains work is key to understanding how consumers really make choices, argues Nobel Laureate Daniel McFadden.

Some consumers suffer from “agoraphobia” or a fear of markets according to new research presented by Nobel laureate Daniel McFadden that throws doubt on the classical idea that people are driven by relentless and consistent pursuit of self-interest to maximise their well-being.
Professor McFadden entitled his paper The New Science of Pleasure, to purposefully play on a phrase coined by Anglo-Irish political economist Francis Edgeworth some 130 years ago.

He told the audience of young economists and fellow laureates at the 5th Lindau Meeting on Economic Sciences on 22 August that new studies of consumer behaviour that drew on psychology, sociology, biology and neurology gave economists a deeper understanding of how consumers made choices.
Rational analysis says that we should relish choice and the opportunities offered by markets. “Yet we are in fact challenged by choice and we use all kinds of ways such as procrastination to avoid having to make choices. One of the reasons is that there are risks associated with making choices,” he said.

Source: blog.lindau-nobel.org

See on Scoop.itBounded Rationality and Beyond

27
ago
14

Tips for Building Relational Equity (Video)

Networking is one of the most essential career management strategies, and it seems our readers agree, as proven by the popularity of networking content. In this recent Career Conversation with Seattle-based career coach Paula Fitzgerald Boos, we consider the topic further and discuss the real aim of networking — building relational equity.

Source: blogs.cfainstitute.org

See on Scoop.itBounded Rationality and Beyond

27
ago
14

Anchoring or Loss Aversion? Empirical Evidence from Art Auctions

Abstract: We find evidence for the behavioral biases of anchoring and loss aversion. We find that anchoring is more important for items that are resold quickly, and we find that the effect of loss aversion increases with the time that a painting is held. The evidence in favor of anchoring and loss aversion with this large dataset validates previous results and adds to the empirical evidence a finding of increasing loss aversion with the length a painting is held. We do not find evidence that investors can take advantage of these behavioral biases.

 

Source: www.brandeis.edu

See on Scoop.itBounded Rationality and Beyond

27
ago
14

Stirling Behavioural Science Blog : Lecture on Rationality, Utility, Value and Decision Making

 am currently giving a set of lectures as part of a module “Behavioural Economic: Concepts and Theories” in Stirling. I am posting brief informal summaries of some of these lectures on the blog to generate discussion.

Today’s lecture was on Rationality, Utility, Value and Decision-making. The lecture consisted of six sections (Fig. 1): (i) concepts of rationality; (ii) rational choice in conditions of certainty; (iii) rational choice in conditions in conditions of uncertainty; (iv) challenges to rational choice (v) loss aversion and the endowment effect; and (vi) implications of rationality assumptions and threats to their validity for policy. 

(i) Concepts of rationalityThe main point of this lecture is to give a working definition of what we mean by rationality in Economics. This is a complex construct with many potential meanings across a wide range of literatures. In Economics we generally tend to mean that decision makers are consistent in their behaviour rather than to question their motivations. The basic microeconomic models of the consumer generally assume rational utility maximising behaviour.

Source: economicspsychologypolicy.blogspot.co.uk

See on Scoop.itBounded Rationality and Beyond

27
ago
14

Cash versus debit card: the role of budget control

Abstract: Due to the financial crisis, an increasing number of households face financial problems. This may lead to an increasing need for monitoring spending and budgets. We demonstrate that both cash and the debit card are perceived as helpful in this respect. We show that, on average, consumers responsible for the financial decision making within a household find the debit card more useful for monitoring their household finances than cash. Individuals differ in major respects, however. In particular, low earners and the liquidity-constrained prefer cash as a monitoring and budgeting tool. Finally, we present evidence that at an aggregated level, such preferences strongly affect consumer payment behaviour. We suggest that the substitution of cash by cards may slow down because of the financial crisis. Also, we show that cash still brings benefits that electronic alternatives have been unable to match. This suggests that inclusion of enhanced budgeting and monitoring features in electronic payment instruments may encourage consumers to use them more frequently.

Source: www.dnb.nl

See on Scoop.itBounded Rationality and Beyond

26
ago
14

How the Brain Makes Sense of Spaces

When an animal encounters a new environment, the neurons in its brain that are responsible for mapping out the space are ready for anything. So says a new study in which scientists at the Howard Hughes Medical Institute’s Janelia Research Campus examined neuronal activity in rats as they explored an unusually large maze for the first time.

The researchers found that neurons in the brain’s hippocampus, where information about people, places, and events is stored, each contribute to an animal’s mental map at their own rate. Some neurons begin to associate themselves with the new space immediately, while others hold back, contributing only if the space expands beyond a size that can be represented by the first-line neurons. Similar mechanisms may be at play as the human brain records a new experience, says Janelia group leader Albert Lee, who led the study. Lee, graduate student Dylan Rich, and Hua Peng-Liaw, a technician in Lee’s lab, published their findings in the August 15, 2014, issue of the journal Science.

 

Source: neurosciencenews.com

See on Scoop.itBounded Rationality and Beyond




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agosto: 2014
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