Sugar Ray Robinson Essay Example for Free

Sugar Ray Robinson Essay In the 1940s America had become a more technologically advanced country. The television had been invented, along with the world’s first computer and Americans were encouraged that ownership of this technology would make their lives better. This gave people financial problems. At this time the national debt was 43 billion dollars. Willy followed this trend by having the car, the refrigerator, the washing machine and the vacuum cleaner. Willy could not afford to buy these things out right, therefore was under pressure to make payments each month. This affected his mental state because not only did he have to provide for his family, but also had to earn extra to give his family these items that Americans were being persuaded were necessary. The American Dream is to be successful and envied without using a lot of effort. As Lorraine Hansberry says something has indeed gone wrong with at least part of the American Dream, and Willy Loman is a victim of the detour. I believe that there is a lot wrong with the American and how it is misleading many people into believing that America is the key to success. However, not all of Willys mistakes can be blamed on the American society, because Willy is able to think for himself. Also not everybody was miserable in the 1940s. This is also the era where people were successful, such as Sugar Ray Robinson and Joe Louis in boxing, Gary Cooper, Betty Davis, Judy Garland and Marlon Brando in film, and, Irving Shaw and Doctor Spock in literature. Aristotle’s tragic theory is that the character in question is a great man, who dies, after: undergoing a fall, having a tragic character flaw, at some point being subjected to some recognition of his flaws and making an audience feels pity and catharsis. One point that Aristotle made was that the hero of the story had to be a great man. In this play, it is the opposite. Willy is a common man living in America, with a stereotypical job, money problems, living in a normal house with a typical American family. He hasnt done anything great for society, or even for his family. But, does the fact that he is not a great man, make the audience less impressed or moved by his downfall? This is dubious. On one hand, the audience feel less sympathetic because he is quite ignorant of what is happening, and he didn’t try to help any situations. For example when he is in the garden planting seeds, he didn’t listen to what Linda said about nothing being able to grow in the garden. Also his flaws could have made him gain less sympathy because in some cases he was to blame, for example the way that he treated Linda, telling her to shut up all the time makes him seem rude and disrespectful. By treating Linda this way, he will not gain the audiences respect, making him fail in being a tragic hero. On the other hand, the audience are able to connect with Willy. As Popkin says Willy is Everyman meaning that he is a recognisable character in a realistic world. Another point that Aristotle made was that the character had a downfall or a reversal of fortune. This is true of Willy in the play for he creates pity from the audience when he loses his job and has to tell his sons, I was fired and Im looking for a little good news to tell your mother, some audience members could also feel pity for Willy because he is losing his mind and recalling his past memories, for example whenever he speaks to Ben. Ben is both a character and a representation of the American Dream. One example of Ben’s representation of the American Dream is when Willy is playing a game of cards with Charley, Ben says â€Å"I must make a train, William. There are several properties I’m looking at in Alaska. † This shows Ben’s success by the fact that he is looking to buy property whereas the audience know that Willy has to pay debts. This is also showing a contrast between the two characters. Another point made in Aristotle’s theory is that the character must have a flaw or be flawed. Once again this is true of Millers character, Willy. In my opinion, Willys biggest flaw is how he is unfaithful to his wife, and how Biff, his son, finds out. You you gave her mamas stockings. I dont think flaws like this make an audience feel pity for the character, they could feel angry for the way he disrespected Linda, and maybe feel sympathetic for Biff who had to keep what he found out a secret. An audience would realise that he is keeping this secret when Linda talks about Willy’s attempted suicide, when Biff says, â€Å"What woman? † An audience would be able to comprehend what Biff is talking about from seeing previous flashbacks, of Willy’s. Willy also has other flaws, for example, his mental illness plays a big part throughout the play, and an audience could feel pity for him because it is not necessarily his fault that he is suffering from mind loss. Personally, I dont feel sympathetic to Willy because he is flawed. I feel that Willy has made unforgivable mistakes, such as making Happy crave attention by ignoring him, when Willy has a flashback remembering old times with his sons, Happy says,Im losing weight, you notice, Pop? But Willy doesn’t respond to him. Also he practically tells Biff that it is acceptable to steal during another flashback with Ben, Go right over to where theyre building the apartment house and get some sand. Although Willy is mentally ill, he is still conscious of what he is doing, therefore able to correct his mistakes. An additional point within Aristotle’s theory was that the character creates catharsis within an audience member. Catharsis is a relief of strong suppressed emotions, in this case through a piece of drama. Vogal agreed with this point when he said, Miller has awoken catharsis in us. I believe that this all depends on how sympathetic the audience feels towards Willy. Somebody who feels upset about how Willy had spent his life would feel this way at the end of the play. But, if somebody didnt feel sympathetic about what happened to Willy throughout the play, would not feel catharsis, and could feel as if it was his own fault that all these bad things have happened to him. An arguable point made is whether Willy has a moment of self recognition, which is another point that Aristotle made. Some people may argue that Willy does have a point of self recognition because he kills himself, thinking that the family would come into money therefore making himself realise that he had failed to support his family. Another argument would be that Willy knew because of the way Ben spoke to him. For Ben, the American Dream made him successful. But, even though he was a strong believer, the American Dream didnt do anything for Willy. Other people may say that Willy didnt have a moment of self recognition because when times were hard, for example when he came back home from his business trip. He still had to do it all over again to try and gain success. People could also say that Willy didnt kill himself to help his family, but because of his mental illness. In my opinion Willy does have a moment of self recognition, because he thinks that killing himself and getting the insurance money is the best thing for his family. I also think that it is his mental illness that stops him from realising that they wont get any money because he is committing suicide. In conclusion, I think that Willy is partially successful in being a tragic hero and evoking sympathy from an audience. I agree that what has happened to him is very upsetting, such as his death and him losing his job. However, I feel that in some cases he deserves to be punished for his terrible errors. Such as the way he treats his family. Willy is quite naive, with believing that practically wasting his money will make him successful. However, I do agree with Miller when he says (About Aristotle’s theory being out of date. ) Because a modern audience may suffer the same common tragedy as Willy does on this play.

Behavioural Finance Theory Dissertation

Behavioural Finance Theory Dissertation A survey of behavioral finance 1. Introduction: The Modern investment theory and its application is predicated on the Efficient Markets Hypothesis (EMH), the assumption that markets fully and instantaneously integrate all available information into market prices. Underlying this comprehensive idea is the assumption that the market participants are perfectly rational, and always act in self-interest, making optimal decisions. These assumptions have been challenged. It is difficult to tip over the Neo classical convention that has yielded such insights as portfolio optimization, the Capital Asset Pricing Model, the Arbitrage Pricing Theory, the Cox Ingersoll-Ross theory of the term structure of interest rates, and the Black-Scholes/Merton option pricing model, all of which are predicated on the EMH (Efficient Market Hypothesis) in one way or another. At few points the EMH criticizes the existing literature of behavioral finance, which shows the difference of opinion on psychology economics. The field of psychology has its roots in empirical observation, controlled experimentation, and clinical applications. According to psychology, behavior is the main entity of study, and only after controlled experimental dimensions do psychologists attempt to make inferences about the origins of such behavior. On the contrary, economists typically derive behavior axiomatically from simple principles such as expected utility maximization, making it easier for us to predict economic behavior that are routinely refuted empirically The biggest threats to Modern Portfolio theory is the theory of Behavioral Finance. It is an analysis of why investors make irrational decisions with respect to their money, normal distribution of expected returns generally appears to be invalid and also that the investors support upside risks rather than downside risks. The theory of Behavioral finance is opposite to the traditional theory of Finance which deals with human emotions, sentiments, conditions, biases on collective as well as individual basis. Behavior finance theory is helpful in explaining the past practices of investors and also to determine the future of investors. Behavioral finance is a concept of finance which deals with finances incorporating findings from psychology sociology. It is reviewed that behavioral finance is generally based on individual behavior or on the implication for financial market outcomes. There are many models explaining behavioral finance that explains investors behavior or market irregularities where the rational models fail to provide adequate information. We do not expect such a research to provide a method to make lots of money from the inefficient financial market very fast. Behavioral finance has basically emerged from the theories of psychology, sociology and anthropology the implications of these theories appear to be significant for the efficient market hypothesis, that is based on the positive notion that people behave rationally, maximize their utility and are able to prices observation, a number of anomalies (irregularities) have appeared, which in turn suggest that in the efficient market the principle of rational behavior is not always correct. So, the idea of analyzing other model of human behavior has came up. Further (Gervais, 2001) explained the concept where he says that People like to relate to the stock market as a person having different moods, it can be bad-tempered or high-spirited, it overreacts one day and behaves very normally the other day. As we know that human behavior is unpredictable and it behaves differently in different situations. Lately many researchers have suggested the idea that psychological analysis of investors may be very helpful in understanding the financial markets better. To do so it is important to understand the behavioral finance presenting the concept that The traditional theory has overestimated the rationality of investors , their biases in decisions casting a cumulative impact on asset prices. To many researchers the study of behavior in finance appeared to be a revolution. As it transforms peoples mentality and perception about the markets and factors that influence the markets. â€Å"The paradigm is shifting. People are continuing to walk across th e border from the traditional to the behavioral camp†. (Gervais, 2001, P.2). On the contrary some people believe that may be its too early call it a revolution. Eugene Fama( Gervais, 2001) argued that Behavioral finance has not really shown impacts on the world prices, and the models contradict each other on different point of times. Giving very less account to the behaviorist explanations of trends and the irregularities †anomaly† (any occurrence or object that is strange, unusual, or unique) Also argued that in order to locate the patterns the data mining techniques are much helpful.. Other researchers have also criticized the idea that the behavioral finance models tend to replace the traditional models of market functions. The weaknesses in this area, explained by him (Gervais, 2001) are that generally overreaction and under reaction are the major causes of the market behavior. Where People take the behavior that seems to be easy for the particular study regardless of the fact that whether these biases are either primary factor of economic forces or not. Secondly, Lack of trained and expert people. The field does not have enough trained professionals both in the psychology or finance fields and therefore as a result the models presented is being put up together are improvised. David Hirshleifer (Gervais, 2001) focuses on the individual behavior impacting asset prices and explaining that the field of behavioral finance is currently in its developmental stage, in its way of development it is facing a lot of disagreement which itself is a productive one. Hirshleifer points out that if we apply the conceptual models of behavioral finance to the corporate finance, it can majorly pay off. If the money managers are incorrectly rational, that means that they are probably not evaluating their investment strategies correctly. They might take wrong decisions in their capital structure decisions. It has been found that quite a few people foresee behavioral finance displacing the age old Efficient Markets theory. On the contrary the underlying assumption that the investors and the managers are completely rational makes insightful sense to many people. 2. Traditional Finance Empirical Evidence: Traditional theory assumes that agents are rational the law of one price holds that is a perfect scenario. Where the law of One price states that securities with the same pay off have same price, but in real world this law is violated when people purchase securities in one market for immediate resale in another, in search of higher profits because of price differentials known as Arbitrageurs. And the agents rationality explains the behavior of investor Professional Individual which is generally inconsistent with the rationality or the future predictions. If a market achieves a perfect scenario where agents are rational law of one price holds then the market is efficient. With the availability of amount of information, the form of market changes. It is unlikely that market prices contain all private information. The presence of noise traders (traders, trading randomly not based on information). Researches show that stock returns are typically unpredictable based on past returns wh ere as future returns are predictable to some extent. Few examples from the past literature explains the problem of irrationality which occurs because of naive diversification, behavior influenced by framing, the tendency of investors of committing systematic errors while evaluating public information.(Glaser et al, 2003) Recent studies suggest that peoples` attitude towards the riskiness of a stock in future the individual interpretation may explain the higher level trading volume, which itself is a vast topic for insight. A problem of perception exist in the investors that Stocks have a higher risk adjusted returns than bonds. Another issue with the investors is that these investors either care about the whole stock portfolio or just about the value of each single security in their portfolio and thus ignore the correlations. The concept of ownership society has been promoted in the recent years where people can take better care of their own lives and be better citizen too if they are both owner of financial assets and homeowners. As a researcher suggested that in order to improve the lives of less advantaged in our society is to teach them how to be capitalist, In order to put the ownership society in its right perspective, behavioral finance is needed to be understood. The ownership society seems very attractive when people appear to make profits from their investments. Behavioral finance also is very helpful in understanding justifying government involvement in the investing decisions of individuals. The failure of millions of people to save properly for their future is also a core problem of behavioral finance. (Shiller, 2006) According to (Glaser et al, 2003) there are two approaches towards Behavioral Finance, where both tend to have same goals. The goals tend to explain observed prices, Market trading Volume Last but not the least is the individual behavior better than traditional finance models. Belief Based Model: Psychology (Individual Behavior) Incorporates into Model Market prices Transaction Volume. It includes findings such as Overconfidence, Biased Self- Attrition, and Conservatism Representativeness. Preference Based Model: Rational Friction or from psychology Find explanations, Market detects irregularities individual behavior. It incorporates Prospect Theory, House money effect other forms of mental accounting. Behavioral Finance and Rational debate: The article by (Heaton and Rosenberg,2004) highlights the debate between the rational and behavioral model over testability and predictive success. And we find that neither of them actually offers either of these measures of success. The rational approach uses a particular type of rationalization methodology; which goes on to form the basis of behavior finance predictions. A closer look into the rational finance model goes on to show that it employs ex post rationalizations of observed price behaviors. This allows them greater flexibility when offering explanations for economic anomalies. On the other hand the behavior paradigm criticizes rationalizations as having no concrete role in predicting prices accurately, that utility functions, information sets and transaction costs cannot be `rationalized. Ironically they also reject the rational finances explanatory power which plays an essential role in the limits of arbitrage, which actually makes behavioral finance possible. Milton Friedmans theory lays the basis of positive economics. His methodology focuses on how to make a particular prediction; it is irrelevant whether a particular assumption is rational or irrational. According to this methodology, the rational finance model relies on a limited assumption space since all assumptions that are supposedly not rational have been eliminated. This is one of the major reasons behind the little success in rational finance predictions. Despite the minimal results, adherents of this model have criticized the behavioral model as lacking quantifiable predictions that are based on mathematical models. Rational finance has targeted a more important aspect in the structure of the economy, i.e. Investor uncertainty, which further cause financial anomalies. In explaining these assertions, the behavioural emphasises the importance of taking limits in arbitrage. Friedmans methodological approach falls into the category `instrumentalism, which basically states that theories are tools for predictions and used to draw inferences. Whether an assumption is realistic or rational is of no value to an instrumentalist. By narrowing what may or may not be possible, one will inevitably eliminate certain strategies or behaviors which might in fact go on to maximize utility or profits based on their uniqueness. An assumption could be irrational even in the long run, but it is continuously revised and refined to make it into something useful. In opposition to this, many individuals have gone on to say that behaviouralists are not bound by any constraints thus making their explanations systematically irrational. Rubinstein (2001) described how when everyone fails to explain a particular anomaly, suddenly a behavioral aspect to it will come up, because that can be based on completely abstract irrational assumptions. To support rationality, Rubinstein came up with two arguments. Firstly he went on to say that an irrational strategy that is profitable, will only attract copy cat firms or traders into the market. This is supported when a closer look is given towards limits to arbitrage. Secondly through the process of evolution, irrational decisions will eventually be eliminated in the long run. The major achievements characterized of the rational finance paradigm consist of the following: the principle of no arbitrage; market efficiency, the net present value decision rule, derivatives valuation techniques; Markowitzs (1952) mean-variance framework; event studies; multifactor models such as the APT, ICAPM, and the Consumption- CAPM. Despite the number of top achievements that supporters of the rational model claim, the paradigm fails to answer some of the most basic financial economic questions such as `What is the cost of capital for this firm? or `What is its optimal capital structure?; simply because of their self imposed constraints. So far this makes it seem like rational finance and behavioral finance are mutually exclusive. Contrary to this, they are actually interdependent, and overlap in several areas. Take for instance the concept of mispricing when there is no arbitrage. Behavior finance on the other hand suggests that this may not be the case; irrational assumptions in the market will still lead to mispricing. Further even though certain arbitrageurs may be able to identify irrationality induced mispricing, because of the imperfect market information, they are unable to convince investors of its existence. Over here, the rational model is accepting the existence of anomalies which are affected both through the factors of risk and chance; therefore coinciding with the perspective of behavioral finance. Two instances are clear examples of how rationalization is an important limit of arbitrage: i) the build-up and blow-up of the internet bubble; and ii) the superiority of value equity strategies. If we focus on the latter, we are able to see behavioral finance literature that highlights the superiority of such strategies in the ability of analysts to extrapolate results for investors. This is possible when rationalization is taken as a limit to arbitrage. Similarly these strategies may also limit arbitrage against mispricing, through the great risk associated with stocks. In explaining most anomalies it is essential that analysts first conclude whether pricing is rational or not. To prove their hypothesis that irrationality-induced mispricing exists, behaviouralists may find it easier if they accepted the role of rationalization in limits of arbitrage. Slow information diffusion and short-sales constraints are other factors that explain mispricing. However these factors alone cannot form the basis of a strong and concrete explanation that will clarify pricing across firms and also across time. Those supporting the rational paradigm attack behavioral finance adherents in that their predictions for the financial market have been made on irrational assumptions; that are not supported by concrete mathematical or scientific models. In their view the lack of concrete discipline in the methodology adopted in behavior finance leads to the lack of testing in their forecasts. On the other hand the rational model is criticized for its lack of success in financial predictions. The behaviouralists claim that this limitation exists because the supporters of rational finance dismiss aspects of the economic market simply because it may not fall into explainable rational behavior. Both perspectives claim to align themselves with respect to the goals of `testability and `predictions, while at the same time continue to offer evidence against the other model. In reality however, rather than being exclusively mutual both paradigms assist one another in making their predictions. A persons tendency to make errors is known as cognitive bias. These errors are based on the cognitive factors that include statistical judgments, social attribution and memory being common to all the humans in the world. (Crowell, 1994, p. 1) Cognitive bias is the tendency of intelligent, well-informed people to consistently do the wrong thing. The reason behind this cognitive bias is that the Human brain is made for interpersonal relationships and not for processing statistics. The paper discusses facility of forecasts. Generally it is said that the world is divided into two groups: People forecasting positively and people forecasting negatively. These forecasts exaggerate the reliability of their forecasts and trace it to the illusion of validity which exists even when the illusionary character is recognized. (Fisher and Statman, 2000) discussed five cognitive bias, underlying the illusion of validity that are Overconfidence, Confirmation, Representativeness, Anchoring, and Hindsig ht (Shiller, 2002) discusses, that irrational behavior may disappear with more learning and a much more structured situation. As the past research proves it that may of cognitive biases in human judgment value uncertainty will change, they may be convinced if given proper instructions, on the part-experience of irrational behavior. The three most common themes of behavioral finance are as follows: Heuristics, Framing Market Inefficiencies. People when decide on the basis of the rules of thumb regardless of rationalizing suffer from Heuristics. Some forms of Heuristics are: Prospect theory, Loss Aversion, Status quo Bias, Gamblers Fallacy, Self-serving bias and lastly Money illusion. Framing is basically the problem of decision making where the decision is based on the point where there is difference in how the case is presented to the decision maker. Cognitive framing Mental accounting Anchoring are the common forms of Framing 3. Market in efficiencies: As we found out that observed market outcomes are totally opposite to the rational expectations and the efficient market hypothesis. Mis pricing, irrational decision making and return anomalies are the examples of it. These terms have been described as specific market anomaly from a behavioral point of view. Anomaly (economic behavior) Disposition effect Endowment effect Inequity aversion Intertemporal consumption Present-biased preferences Momentum investing Greed and fear Herd behavior Anomalies (market prices and returns) Efficiency wage hypothesis Limits to arbitrage Dividend puzzle Equity premium puzzle Behavioral Economic Models are restricted to a certain observed market anomaly and it adjusts the neo classical models by explaining the phenomenon of Heuristics and framing to the decision makers. It is usually said that economics get along with in the neo classical framework, with just one restriction of the assumption of rationality. Loix et. Al in their paper Orientation towards Finances explains the individual financial management behavior, people dealing with their financial means. They have analyzed the Non-specific Financial behavior as already we see extensive research on the specific finance behavior such as saving, Taxation, Gambling, amassing debt. But they had given a lot of importance to stock market, investors and households. The analysis of general public`s behavior was done, where an ordinary man is not sure and simply act according to the guesses over their money related issues. It was also found that people interested in economic and financial matters are much more active in collecting specific information than general public, stating that financial behavior of household is an important relevant topic that needs to be discussed in much more details. Household financial management is similar to the financial management. The construct of orientation towards finances was developed where the individual ORTO FIN focuses on competencies (interest and skills). Having stronger money attitude is an indication of stronger orientation towards finances and much more effective competencies. Therefore we expect some relevance and similarity between corporate and household management behavior as both require organizing, forecasting, planning and control. (Loix et. Al, 2005) analyzed general publics behavior in basically dividing them into two groups, Financial Information Personal financial planning. Also explaining some practical and theoretical gaps in the area of psychology of money usage, they concluded that ORTOFIN (Orientation towards finance) indicates the involvement of individuals in managing their finances. Proving out the point that active interest in financial information and an urge to plan expenses are two main factors. A stronger ORTFIN indicates: Greater use of debit accounts, Higher savings account, Wide variety of investments, Greater awareness of ones financial Intimate knowledge of the details of Ones savings/deposit accounts obsessed by money, Higher achievement and power in monetary terms, Further age is also inversely proportional. Shiller in 2006, in his article talked about the co-evolution of neo-classical and behavior finance. In 1937 when A. Samuelsson one of the great economists wrote about people maximizing the present value of utility subject to a present vale budget constraint. Another judgment he realized was time being consistent human behavior where if at any time t 0 Where people reconsidered the problem of maximization from that date forward, they would not change their decision where as in real life it is totally opposite for example people sometimes try to control themselves by binding their future decision as from history we find out that that some of man make irrevocable trust in the taking out of life insurance as a compulsory savings measure. (shiller, 2006, p.) Considering personal saving rate, saving and down for no reason has emerged as a weakness of human self control. People seem to be vulnerable to complacency from time to time about providing for their own future. The distinction between neoclassical and behavioral finance have therefore been exaggerated. Both of them are not completely different from each other. Behavioral finance is more elastic willing to learn from other sciences and less concerned about the elegance of models whereby explaining human behavior. 4. Investing and cognitive bias: Money Managers and Money management is a very popular phenomenon. The performance in the stock market is measured at the daily basis and not to wait for a highly subjective annual review of ones performance by ones superior. Market grades you on a daily basis. The smarter one is, the more confident one becomes of ones ability to succeed, clients support them by trusting them that eventually helps their careers. But the truth is that few money managers put in sufficient amount of time and effort to figure out what works and develop a set of investment principles to guide their investment decisions (Browne, 2000). Further Browne discussed the importance of asset allocation and risk aversion, in order to understand why we do what we do regardless of whether it is rational or not. General public opts for money Managers to deal with their finances and these managers are categorized in three ways: Value Managers, Growth Managers and Market Neutral Managers. The vast majority of money manag ers are categorized as either value managers or growth managers although a third category, market neutral managers, is gaining popularity these days and may soon rival the so-called strategies of value and growth. Some investment management firms even are being cautious by offering all styles of investments. What too few money managers do is analyze the fundamental financial characteristics of portfolios that produce long-term market beating results, and develop a set of investment principles that are based on those findings. Difference of opinion on the definition of Value is the problem. The reasons for this are two-fold, one being the practical reality of managing large sums of money, and the other related to behavior. As the assets under management of an advisor grow, the universe of potential stocks shrinks. Analyzing that why individual and professional investors do not change their behavior even when they face empirical evidence, that suggests that their decisions are less th an optimal. An answer to this question is said to be that being a contrarian may simply be too risky for the average individual or professional. If a person is wrong on the collective basis, where everyone else also had made a mistake, the consequences professionally and for ones own self-esteem are far less than if a person is wrong alone. The herd instinct allows for the comfort of safety in numbers. The other reason is that individuals try to behave the same way and do not tend to change courses of action if they are happy. If the results are not too painful individuals can be happy with sub-optimal results. Moreover, individuals who tend to be unhappy make changes often and eventually end up being just as unhappy in their new circumstances. According to the traditional view of Investment management, fundamental forces drive markets, however many other investment firms considers to be active and working out based on their experienced Judgment. It is also believed that Judgmental overrides of Value Fundamental forces of markets can be lethal as well as a cause of Financial Disappointment. From the history it has been found that people Override at the wrong times and in most cases would be better off sticking to their investment disciplines (Crowell, 1994) and the reason to this behavior is the Cognitive bias. According to many researchers, stocks of small companies with low price/book ratios provide excess returns. Therefore, given a choice among small cheap stocks large high priced stocks, prominent investors (financial analysts, senior company executives and company directors) will certainly prefer the small cheap ones. But the fact is opposite to this situation where these prominent investors would opt for large high priced ones and so suffer from cognitive bias and further regret. According to a survey in 1992/1993, a research was carried out that included senior executives directors where they were suppose to rank companies in the similar industry ba sed on eight factors. Quality of Management, Quality of products services, Innovativeness, Long term Investment value, Financial soundness, Ability to attract, develop and keep talented people, Responsibility to the community and environment, Wise Use of Corporate assets. (Crowell, 1994). The assumptions that we made were that that Long term investment value should be negatively correlated with size since small stocks provide superior returns. Long term Investment value should have a negative correlation with Price/book since low Price/Book stocks provide superior returns. (Crowell, 1994). Whereas the results of the survey were contrary that stated that Long Term Investment had a positive correlation with the size and also that the Long term investment value had a positive correlation with the Price/Book stocks. According to Shefrin and statman, prominent investors overestimate the probability that a good company is a good stock, relying on the representative heuristics, concluding that superior companies make superior stocks. Aversion to Regret: aversion to regret is different from aversion to risk; Regret is acute when the individual must take responsibility for the final outcome. Aversion to regret leads to a preference for stocks of good companies. The choice of t he stocks of bad companies involves more personal responsibility and higher probability of regret. Therefore, we find there are two major Cognitive errors: We have a double cognitive error: good company always makes good stock (representativeness), and involves less responsibility(Less aversion to regret. (Crowell, 1994,p.3) The Anti Cognitive bias actions would be admitting to your owned stocks, admitting earlier investment mistakes. Further Taking the responsibility for the actions to improve their performance in the future. The reasons for all the available disciplines, tools, and quantitative techniques is to deal with the Cognitive bias error, where the quantitative investment techniques enables the investment managers to overcome cognitive bias, follow sound investment, and eventually be successful contrarian investor(one who rejects the majority opinion, as in economic matters). Behavioral finance also is very helpful in understanding justifying government involvement in the investing decisions of individuals. The failure of millions of people to save properly for their future is also a core problem of behavioral finance. With the help of two very important examples Shiller explains how Government involvement can influence financial investments of individuals. In April 2005 Tony Blair stated a program when all new born babies were given a birthday present of 250 to 500. The present were to choose among a number of investment alternatives to invest until child comes of age. This is an effect done in order to make the parents feel connected with investments and modern economy. Another example: as it is said that people should be heavily active in stock market when they are young and so generally should reduce the activity with age. According to the conventional rule people should have 100 Age = % age of investment. In 2005 president bush also portfolio announced one such plan for personal account life cycle fund which would be among the option that works will be offered to invest their personal account. It was A centerpiece of the presidents proposal bur a major point to be noticed was the default option. An important aspect of behavioral finance is the human attention is capricious focuses heavily that same times on financial calculations and are subject to distraction and dissipation of default option is central. All this brings us a question that what should an intertemporal optimizer do to manage his portfolio over the lifetime. According to Samuelson someone who wished to maximize the expected value of his intertemporal utility function by managing the allocation of the portfolio between a high yielding asset and less yielding asset would not actually change the allocation through time. Neoclassic finance appears highly relevant to such a discussion in that it offers the appropriate theor etical framework for considering what people ought to do with the portfolio if not what they actually do. Behavioral is beginning to play an important role in public policy such as in social security reforms. 5. Agents Rationality: Global culture Social Contagion: The selective attention exhibited by a human mind is the concept of culture. Every nation, tribe or asocial group has a social cognition reinforced by conversation ritual and symbols, rituals and supposition of a particular nation has a subtle but far reliability affect on human behavior. Some researchers found that the unique customs of people basically appears as a logical outcome of a belief system of a nation group of people. The Cultural factors were one of the major influences on rational or irrational behavior. We find many factors that are same across countries , e.g fashion, music, movies, youthful rebelliou Behavioural Finance Theory Dissertation Behavioural Finance Theory Dissertation A survey of behavioral finance 1. Introduction: The Modern investment theory and its application is predicated on the Efficient Markets Hypothesis (EMH), the assumption that markets fully and instantaneously integrate all available information into market prices. Underlying this comprehensive idea is the assumption that the market participants are perfectly rational, and always act in self-interest, making optimal decisions. These assumptions have been challenged. It is difficult to tip over the Neo classical convention that has yielded such insights as portfolio optimization, the Capital Asset Pricing Model, the Arbitrage Pricing Theory, the Cox Ingersoll-Ross theory of the term structure of interest rates, and the Black-Scholes/Merton option pricing model, all of which are predicated on the EMH (Efficient Market Hypothesis) in one way or another. At few points the EMH criticizes the existing literature of behavioral finance, which shows the difference of opinion on psychology economics. The field of psychology has its roots in empirical observation, controlled experimentation, and clinical applications. According to psychology, behavior is the main entity of study, and only after controlled experimental dimensions do psychologists attempt to make inferences about the origins of such behavior. On the contrary, economists typically derive behavior axiomatically from simple principles such as expected utility maximization, making it easier for us to predict economic behavior that are routinely refuted empirically The biggest threats to Modern Portfolio theory is the theory of Behavioral Finance. It is an analysis of why investors make irrational decisions with respect to their money, normal distribution of expected returns generally appears to be invalid and also that the investors support upside risks rather than downside risks. The theory of Behavioral finance is opposite to the traditional theory of Finance which deals with human emotions, sentiments, conditions, biases on collective as well as individual basis. Behavior finance theory is helpful in explaining the past practices of investors and also to determine the future of investors. Behavioral finance is a concept of finance which deals with finances incorporating findings from psychology sociology. It is reviewed that behavioral finance is generally based on individual behavior or on the implication for financial market outcomes. There are many models explaining behavioral finance that explains investors behavior or market irregularities where the rational models fail to provide adequate information. We do not expect such a research to provide a method to make lots of money from the inefficient financial market very fast. Behavioral finance has basically emerged from the theories of psychology, sociology and anthropology the implications of these theories appear to be significant for the efficient market hypothesis, that is based on the positive notion that people behave rationally, maximize their utility and are able to prices observation, a number of anomalies (irregularities) have appeared, which in turn suggest that in the efficient market the principle of rational behavior is not always correct. So, the idea of analyzing other model of human behavior has came up. Further (Gervais, 2001) explained the concept where he says that People like to relate to the stock market as a person having different moods, it can be bad-tempered or high-spirited, it overreacts one day and behaves very normally the other day. As we know that human behavior is unpredictable and it behaves differently in different situations. Lately many researchers have suggested the idea that psychological analysis of investors may be very helpful in understanding the financial markets better. To do so it is important to understand the behavioral finance presenting the concept that The traditional theory has overestimated the rationality of investors , their biases in decisions casting a cumulative impact on asset prices. To many researchers the study of behavior in finance appeared to be a revolution. As it transforms peoples mentality and perception about the markets and factors that influence the markets. â€Å"The paradigm is shifting. People are continuing to walk across th e border from the traditional to the behavioral camp†. (Gervais, 2001, P.2). On the contrary some people believe that may be its too early call it a revolution. Eugene Fama( Gervais, 2001) argued that Behavioral finance has not really shown impacts on the world prices, and the models contradict each other on different point of times. Giving very less account to the behaviorist explanations of trends and the irregularities †anomaly† (any occurrence or object that is strange, unusual, or unique) Also argued that in order to locate the patterns the data mining techniques are much helpful.. Other researchers have also criticized the idea that the behavioral finance models tend to replace the traditional models of market functions. The weaknesses in this area, explained by him (Gervais, 2001) are that generally overreaction and under reaction are the major causes of the market behavior. Where People take the behavior that seems to be easy for the particular study regardless of the fact that whether these biases are either primary factor of economic forces or not. Secondly, Lack of trained and expert people. The field does not have enough trained professionals both in the psychology or finance fields and therefore as a result the models presented is being put up together are improvised. David Hirshleifer (Gervais, 2001) focuses on the individual behavior impacting asset prices and explaining that the field of behavioral finance is currently in its developmental stage, in its way of development it is facing a lot of disagreement which itself is a productive one. Hirshleifer points out that if we apply the conceptual models of behavioral finance to the corporate finance, it can majorly pay off. If the money managers are incorrectly rational, that means that they are probably not evaluating their investment strategies correctly. They might take wrong decisions in their capital structure decisions. It has been found that quite a few people foresee behavioral finance displacing the age old Efficient Markets theory. On the contrary the underlying assumption that the investors and the managers are completely rational makes insightful sense to many people. 2. Traditional Finance Empirical Evidence: Traditional theory assumes that agents are rational the law of one price holds that is a perfect scenario. Where the law of One price states that securities with the same pay off have same price, but in real world this law is violated when people purchase securities in one market for immediate resale in another, in search of higher profits because of price differentials known as Arbitrageurs. And the agents rationality explains the behavior of investor Professional Individual which is generally inconsistent with the rationality or the future predictions. If a market achieves a perfect scenario where agents are rational law of one price holds then the market is efficient. With the availability of amount of information, the form of market changes. It is unlikely that market prices contain all private information. The presence of noise traders (traders, trading randomly not based on information). Researches show that stock returns are typically unpredictable based on past returns wh ere as future returns are predictable to some extent. Few examples from the past literature explains the problem of irrationality which occurs because of naive diversification, behavior influenced by framing, the tendency of investors of committing systematic errors while evaluating public information.(Glaser et al, 2003) Recent studies suggest that peoples` attitude towards the riskiness of a stock in future the individual interpretation may explain the higher level trading volume, which itself is a vast topic for insight. A problem of perception exist in the investors that Stocks have a higher risk adjusted returns than bonds. Another issue with the investors is that these investors either care about the whole stock portfolio or just about the value of each single security in their portfolio and thus ignore the correlations. The concept of ownership society has been promoted in the recent years where people can take better care of their own lives and be better citizen too if they are both owner of financial assets and homeowners. As a researcher suggested that in order to improve the lives of less advantaged in our society is to teach them how to be capitalist, In order to put the ownership society in its right perspective, behavioral finance is needed to be understood. The ownership society seems very attractive when people appear to make profits from their investments. Behavioral finance also is very helpful in understanding justifying government involvement in the investing decisions of individuals. The failure of millions of people to save properly for their future is also a core problem of behavioral finance. (Shiller, 2006) According to (Glaser et al, 2003) there are two approaches towards Behavioral Finance, where both tend to have same goals. The goals tend to explain observed prices, Market trading Volume Last but not the least is the individual behavior better than traditional finance models. Belief Based Model: Psychology (Individual Behavior) Incorporates into Model Market prices Transaction Volume. It includes findings such as Overconfidence, Biased Self- Attrition, and Conservatism Representativeness. Preference Based Model: Rational Friction or from psychology Find explanations, Market detects irregularities individual behavior. It incorporates Prospect Theory, House money effect other forms of mental accounting. Behavioral Finance and Rational debate: The article by (Heaton and Rosenberg,2004) highlights the debate between the rational and behavioral model over testability and predictive success. And we find that neither of them actually offers either of these measures of success. The rational approach uses a particular type of rationalization methodology; which goes on to form the basis of behavior finance predictions. A closer look into the rational finance model goes on to show that it employs ex post rationalizations of observed price behaviors. This allows them greater flexibility when offering explanations for economic anomalies. On the other hand the behavior paradigm criticizes rationalizations as having no concrete role in predicting prices accurately, that utility functions, information sets and transaction costs cannot be `rationalized. Ironically they also reject the rational finances explanatory power which plays an essential role in the limits of arbitrage, which actually makes behavioral finance possible. Milton Friedmans theory lays the basis of positive economics. His methodology focuses on how to make a particular prediction; it is irrelevant whether a particular assumption is rational or irrational. According to this methodology, the rational finance model relies on a limited assumption space since all assumptions that are supposedly not rational have been eliminated. This is one of the major reasons behind the little success in rational finance predictions. Despite the minimal results, adherents of this model have criticized the behavioral model as lacking quantifiable predictions that are based on mathematical models. Rational finance has targeted a more important aspect in the structure of the economy, i.e. Investor uncertainty, which further cause financial anomalies. In explaining these assertions, the behavioural emphasises the importance of taking limits in arbitrage. Friedmans methodological approach falls into the category `instrumentalism, which basically states that theories are tools for predictions and used to draw inferences. Whether an assumption is realistic or rational is of no value to an instrumentalist. By narrowing what may or may not be possible, one will inevitably eliminate certain strategies or behaviors which might in fact go on to maximize utility or profits based on their uniqueness. An assumption could be irrational even in the long run, but it is continuously revised and refined to make it into something useful. In opposition to this, many individuals have gone on to say that behaviouralists are not bound by any constraints thus making their explanations systematically irrational. Rubinstein (2001) described how when everyone fails to explain a particular anomaly, suddenly a behavioral aspect to it will come up, because that can be based on completely abstract irrational assumptions. To support rationality, Rubinstein came up with two arguments. Firstly he went on to say that an irrational strategy that is profitable, will only attract copy cat firms or traders into the market. This is supported when a closer look is given towards limits to arbitrage. Secondly through the process of evolution, irrational decisions will eventually be eliminated in the long run. The major achievements characterized of the rational finance paradigm consist of the following: the principle of no arbitrage; market efficiency, the net present value decision rule, derivatives valuation techniques; Markowitzs (1952) mean-variance framework; event studies; multifactor models such as the APT, ICAPM, and the Consumption- CAPM. Despite the number of top achievements that supporters of the rational model claim, the paradigm fails to answer some of the most basic financial economic questions such as `What is the cost of capital for this firm? or `What is its optimal capital structure?; simply because of their self imposed constraints. So far this makes it seem like rational finance and behavioral finance are mutually exclusive. Contrary to this, they are actually interdependent, and overlap in several areas. Take for instance the concept of mispricing when there is no arbitrage. Behavior finance on the other hand suggests that this may not be the case; irrational assumptions in the market will still lead to mispricing. Further even though certain arbitrageurs may be able to identify irrationality induced mispricing, because of the imperfect market information, they are unable to convince investors of its existence. Over here, the rational model is accepting the existence of anomalies which are affected both through the factors of risk and chance; therefore coinciding with the perspective of behavioral finance. Two instances are clear examples of how rationalization is an important limit of arbitrage: i) the build-up and blow-up of the internet bubble; and ii) the superiority of value equity strategies. If we focus on the latter, we are able to see behavioral finance literature that highlights the superiority of such strategies in the ability of analysts to extrapolate results for investors. This is possible when rationalization is taken as a limit to arbitrage. Similarly these strategies may also limit arbitrage against mispricing, through the great risk associated with stocks. In explaining most anomalies it is essential that analysts first conclude whether pricing is rational or not. To prove their hypothesis that irrationality-induced mispricing exists, behaviouralists may find it easier if they accepted the role of rationalization in limits of arbitrage. Slow information diffusion and short-sales constraints are other factors that explain mispricing. However these factors alone cannot form the basis of a strong and concrete explanation that will clarify pricing across firms and also across time. Those supporting the rational paradigm attack behavioral finance adherents in that their predictions for the financial market have been made on irrational assumptions; that are not supported by concrete mathematical or scientific models. In their view the lack of concrete discipline in the methodology adopted in behavior finance leads to the lack of testing in their forecasts. On the other hand the rational model is criticized for its lack of success in financial predictions. The behaviouralists claim that this limitation exists because the supporters of rational finance dismiss aspects of the economic market simply because it may not fall into explainable rational behavior. Both perspectives claim to align themselves with respect to the goals of `testability and `predictions, while at the same time continue to offer evidence against the other model. In reality however, rather than being exclusively mutual both paradigms assist one another in making their predictions. A persons tendency to make errors is known as cognitive bias. These errors are based on the cognitive factors that include statistical judgments, social attribution and memory being common to all the humans in the world. (Crowell, 1994, p. 1) Cognitive bias is the tendency of intelligent, well-informed people to consistently do the wrong thing. The reason behind this cognitive bias is that the Human brain is made for interpersonal relationships and not for processing statistics. The paper discusses facility of forecasts. Generally it is said that the world is divided into two groups: People forecasting positively and people forecasting negatively. These forecasts exaggerate the reliability of their forecasts and trace it to the illusion of validity which exists even when the illusionary character is recognized. (Fisher and Statman, 2000) discussed five cognitive bias, underlying the illusion of validity that are Overconfidence, Confirmation, Representativeness, Anchoring, and Hindsig ht (Shiller, 2002) discusses, that irrational behavior may disappear with more learning and a much more structured situation. As the past research proves it that may of cognitive biases in human judgment value uncertainty will change, they may be convinced if given proper instructions, on the part-experience of irrational behavior. The three most common themes of behavioral finance are as follows: Heuristics, Framing Market Inefficiencies. People when decide on the basis of the rules of thumb regardless of rationalizing suffer from Heuristics. Some forms of Heuristics are: Prospect theory, Loss Aversion, Status quo Bias, Gamblers Fallacy, Self-serving bias and lastly Money illusion. Framing is basically the problem of decision making where the decision is based on the point where there is difference in how the case is presented to the decision maker. Cognitive framing Mental accounting Anchoring are the common forms of Framing 3. Market in efficiencies: As we found out that observed market outcomes are totally opposite to the rational expectations and the efficient market hypothesis. Mis pricing, irrational decision making and return anomalies are the examples of it. These terms have been described as specific market anomaly from a behavioral point of view. Anomaly (economic behavior) Disposition effect Endowment effect Inequity aversion Intertemporal consumption Present-biased preferences Momentum investing Greed and fear Herd behavior Anomalies (market prices and returns) Efficiency wage hypothesis Limits to arbitrage Dividend puzzle Equity premium puzzle Behavioral Economic Models are restricted to a certain observed market anomaly and it adjusts the neo classical models by explaining the phenomenon of Heuristics and framing to the decision makers. It is usually said that economics get along with in the neo classical framework, with just one restriction of the assumption of rationality. Loix et. Al in their paper Orientation towards Finances explains the individual financial management behavior, people dealing with their financial means. They have analyzed the Non-specific Financial behavior as already we see extensive research on the specific finance behavior such as saving, Taxation, Gambling, amassing debt. But they had given a lot of importance to stock market, investors and households. The analysis of general public`s behavior was done, where an ordinary man is not sure and simply act according to the guesses over their money related issues. It was also found that people interested in economic and financial matters are much more active in collecting specific information than general public, stating that financial behavior of household is an important relevant topic that needs to be discussed in much more details. Household financial management is similar to the financial management. The construct of orientation towards finances was developed where the individual ORTO FIN focuses on competencies (interest and skills). Having stronger money attitude is an indication of stronger orientation towards finances and much more effective competencies. Therefore we expect some relevance and similarity between corporate and household management behavior as both require organizing, forecasting, planning and control. (Loix et. Al, 2005) analyzed general publics behavior in basically dividing them into two groups, Financial Information Personal financial planning. Also explaining some practical and theoretical gaps in the area of psychology of money usage, they concluded that ORTOFIN (Orientation towards finance) indicates the involvement of individuals in managing their finances. Proving out the point that active interest in financial information and an urge to plan expenses are two main factors. A stronger ORTFIN indicates: Greater use of debit accounts, Higher savings account, Wide variety of investments, Greater awareness of ones financial Intimate knowledge of the details of Ones savings/deposit accounts obsessed by money, Higher achievement and power in monetary terms, Further age is also inversely proportional. Shiller in 2006, in his article talked about the co-evolution of neo-classical and behavior finance. In 1937 when A. Samuelsson one of the great economists wrote about people maximizing the present value of utility subject to a present vale budget constraint. Another judgment he realized was time being consistent human behavior where if at any time t 0 Where people reconsidered the problem of maximization from that date forward, they would not change their decision where as in real life it is totally opposite for example people sometimes try to control themselves by binding their future decision as from history we find out that that some of man make irrevocable trust in the taking out of life insurance as a compulsory savings measure. (shiller, 2006, p.) Considering personal saving rate, saving and down for no reason has emerged as a weakness of human self control. People seem to be vulnerable to complacency from time to time about providing for their own future. The distinction between neoclassical and behavioral finance have therefore been exaggerated. Both of them are not completely different from each other. Behavioral finance is more elastic willing to learn from other sciences and less concerned about the elegance of models whereby explaining human behavior. 4. Investing and cognitive bias: Money Managers and Money management is a very popular phenomenon. The performance in the stock market is measured at the daily basis and not to wait for a highly subjective annual review of ones performance by ones superior. Market grades you on a daily basis. The smarter one is, the more confident one becomes of ones ability to succeed, clients support them by trusting them that eventually helps their careers. But the truth is that few money managers put in sufficient amount of time and effort to figure out what works and develop a set of investment principles to guide their investment decisions (Browne, 2000). Further Browne discussed the importance of asset allocation and risk aversion, in order to understand why we do what we do regardless of whether it is rational or not. General public opts for money Managers to deal with their finances and these managers are categorized in three ways: Value Managers, Growth Managers and Market Neutral Managers. The vast majority of money manag ers are categorized as either value managers or growth managers although a third category, market neutral managers, is gaining popularity these days and may soon rival the so-called strategies of value and growth. Some investment management firms even are being cautious by offering all styles of investments. What too few money managers do is analyze the fundamental financial characteristics of portfolios that produce long-term market beating results, and develop a set of investment principles that are based on those findings. Difference of opinion on the definition of Value is the problem. The reasons for this are two-fold, one being the practical reality of managing large sums of money, and the other related to behavior. As the assets under management of an advisor grow, the universe of potential stocks shrinks. Analyzing that why individual and professional investors do not change their behavior even when they face empirical evidence, that suggests that their decisions are less th an optimal. An answer to this question is said to be that being a contrarian may simply be too risky for the average individual or professional. If a person is wrong on the collective basis, where everyone else also had made a mistake, the consequences professionally and for ones own self-esteem are far less than if a person is wrong alone. The herd instinct allows for the comfort of safety in numbers. The other reason is that individuals try to behave the same way and do not tend to change courses of action if they are happy. If the results are not too painful individuals can be happy with sub-optimal results. Moreover, individuals who tend to be unhappy make changes often and eventually end up being just as unhappy in their new circumstances. According to the traditional view of Investment management, fundamental forces drive markets, however many other investment firms considers to be active and working out based on their experienced Judgment. It is also believed that Judgmental overrides of Value Fundamental forces of markets can be lethal as well as a cause of Financial Disappointment. From the history it has been found that people Override at the wrong times and in most cases would be better off sticking to their investment disciplines (Crowell, 1994) and the reason to this behavior is the Cognitive bias. According to many researchers, stocks of small companies with low price/book ratios provide excess returns. Therefore, given a choice among small cheap stocks large high priced stocks, prominent investors (financial analysts, senior company executives and company directors) will certainly prefer the small cheap ones. But the fact is opposite to this situation where these prominent investors would opt for large high priced ones and so suffer from cognitive bias and further regret. According to a survey in 1992/1993, a research was carried out that included senior executives directors where they were suppose to rank companies in the similar industry ba sed on eight factors. Quality of Management, Quality of products services, Innovativeness, Long term Investment value, Financial soundness, Ability to attract, develop and keep talented people, Responsibility to the community and environment, Wise Use of Corporate assets. (Crowell, 1994). The assumptions that we made were that that Long term investment value should be negatively correlated with size since small stocks provide superior returns. Long term Investment value should have a negative correlation with Price/book since low Price/Book stocks provide superior returns. (Crowell, 1994). Whereas the results of the survey were contrary that stated that Long Term Investment had a positive correlation with the size and also that the Long term investment value had a positive correlation with the Price/Book stocks. According to Shefrin and statman, prominent investors overestimate the probability that a good company is a good stock, relying on the representative heuristics, concluding that superior companies make superior stocks. Aversion to Regret: aversion to regret is different from aversion to risk; Regret is acute when the individual must take responsibility for the final outcome. Aversion to regret leads to a preference for stocks of good companies. The choice of t he stocks of bad companies involves more personal responsibility and higher probability of regret. Therefore, we find there are two major Cognitive errors: We have a double cognitive error: good company always makes good stock (representativeness), and involves less responsibility(Less aversion to regret. (Crowell, 1994,p.3) The Anti Cognitive bias actions would be admitting to your owned stocks, admitting earlier investment mistakes. Further Taking the responsibility for the actions to improve their performance in the future. The reasons for all the available disciplines, tools, and quantitative techniques is to deal with the Cognitive bias error, where the quantitative investment techniques enables the investment managers to overcome cognitive bias, follow sound investment, and eventually be successful contrarian investor(one who rejects the majority opinion, as in economic matters). Behavioral finance also is very helpful in understanding justifying government involvement in the investing decisions of individuals. The failure of millions of people to save properly for their future is also a core problem of behavioral finance. With the help of two very important examples Shiller explains how Government involvement can influence financial investments of individuals. In April 2005 Tony Blair stated a program when all new born babies were given a birthday present of 250 to 500. The present were to choose among a number of investment alternatives to invest until child comes of age. This is an effect done in order to make the parents feel connected with investments and modern economy. Another example: as it is said that people should be heavily active in stock market when they are young and so generally should reduce the activity with age. According to the conventional rule people should have 100 Age = % age of investment. In 2005 president bush also portfolio announced one such plan for personal account life cycle fund which would be among the option that works will be offered to invest their personal account. It was A centerpiece of the presidents proposal bur a major point to be noticed was the default option. An important aspect of behavioral finance is the human attention is capricious focuses heavily that same times on financial calculations and are subject to distraction and dissipation of default option is central. All this brings us a question that what should an intertemporal optimizer do to manage his portfolio over the lifetime. According to Samuelson someone who wished to maximize the expected value of his intertemporal utility function by managing the allocation of the portfolio between a high yielding asset and less yielding asset would not actually change the allocation through time. Neoclassic finance appears highly relevant to such a discussion in that it offers the appropriate theor etical framework for considering what people ought to do with the portfolio if not what they actually do. Behavioral is beginning to play an important role in public policy such as in social security reforms. 5. Agents Rationality: Global culture Social Contagion: The selective attention exhibited by a human mind is the concept of culture. Every nation, tribe or asocial group has a social cognition reinforced by conversation ritual and symbols, rituals and supposition of a particular nation has a subtle but far reliability affect on human behavior. Some researchers found that the unique customs of people basically appears as a logical outcome of a belief system of a nation group of people. The Cultural factors were one of the major influences on rational or irrational behavior. We find many factors that are same across countries , e.g fashion, music, movies, youthful rebelliou

Love And Marriage In Restoration Comedy

Love And Marriage In Restoration Comedy A comedy is usually a light, rather amusing, play that deals with contemporary life and manners. Such a drama often has a satirical slant, but ends happily. Among the many sub-genres under comedy, one can find the comedy of manners, which originated in France with Molieres Les Precieuses ridicules (1658). Moliere saw this comic form as a way to correct social absurdities. In England, the comedy of manners is represented by the plays of William Wycherley, George Etherege, William Congreve, and George Farquhar. This form was later classed Old Comedy but is now known as Restoration Comedy because it coincided with the return of the Charles II to England. The main goal of these comedies of manners in the period of Restoration is to mock society, or in other ways lift up society for scrutiny, which could cause negative or positive results. In the end, audience will laugh at themselves and society. The definition of comedy and the background of the Restoration Comedy help to explain the themes that run throughout these comedies of manners. One of the major themes is marriage and the game of love. However, if marriage is a mirror of society, the couples in the plays show something very dark and sinister about order. Many critiques of marriage that we see in the play are devastating, but the game of love is not much more hopeful. Although the endings are happy and the man invariably gets the woman, one can see marriages without love and love affairs that are rebellious breaks with tradition. This study will focus on two plays of Restoration comedies, William Wycherleys The Country Wife (1675) and William Congreves The Way of the World (1700), to show how dramatically society has progressed. A dramatic change, in moral attitudes about marriage and love has taken place. In Wycherleys Country Wife, the marriage between Pinchwife and Margery represents a hostile marriage between an old (or older man) and a young woman. The couple, Pinchwife, is the focal point of the play, at least as couples go, and Margery affair with Horner only adds to the humor of the play. Horner runs around cuckolding all of the husbands, while he pretends to be a eunuch. This pretension brings the women swarming to him. He is a master at the game of love, though he is emotionally impotent. He cannot love, which makes him an interesting character for analysis. The relationships in the play are dominated by jealousy or cuckoldry, with the exception of the gay couple, Alithea and Harcourt, but they are really pretty boring. The element of jealousy in marriage seems to be especially prevalent in the play. In Act IV, scene ii, Mr. Pinchwife says, in an aside: Mr. PINCHWIFE. So, tis plain she loves him, yet she has not love enough to make her conceal it from me; but the sight of him will increase her aversion for me and love for him, and that love instruct her how to deceive me and satisfy him, all idiot as she is. He insults her, not to her face of course, but hes serious. He wants her to be stupid, not able to deceive him. But even in her obvious innocence, he doesnt believe she is innocent. To him, every woman came out of natures hands plain, open, silly, and fit for slaves, as she and Heaven intended em. As he says, No woman can be forced. But he also says, in another aside: Mr. PINCHWIFE. Why should women have more invention in love than men? It can only be because they have more desires, more soliciting passions, more lust and more of the devil. Mr. Pinchwife isnt especially bright, but in his jealousy, he becomes a dangerous character. He becomes passionate in his mad ravings, thinking Margery had conspired to cuckold him. Little did he know that he was correct, but if he had known the truth, he would have killed her in his madness. As it is, when she disobeys him, he says: Mr. PINCHWIFE. Once more write as Id have you, and question it not, or I will spoil thy writing with this. I will stab out those eyes that cause my mischief. He doesnt ever hit her or stab her in the play (such actions wouldnt make a very good comedy), but Mr. Pinchwife continually locks Margery in the closet, calls her names, and in all other ways, acts like a complete jerk (to put it nicely). Because of his abusive nature, Margerys affair is not a surprise. In fact, it is accepted as a social norm, along with Horners promiscuity. At the end, the whole scene with Margery learning to lie is also taking in stride because the idea has already been set up when Mr. Pinchwife voiced his fears that if she loved Horner more, she would conceal it from him. And with that, social order is restored. In Congreves The Way of the World, the trend of restoration continues, but marriage becomes more about contractual agreements and greed, then about love. Millamant and Mirabell iron out a pre-nuptial agreement before they agree to marry. Then Millamant, for an instant, seems willing to marry her cousin, Sir Wilful, so that she can keep her money. It is a battle of the wits; it is not a battlefield of emotions. In that way, The Way of the World can be likened to Shakespeares Much Ado About Nothing, where Beatrice and Benedict play at love in their battle of wits. Its comical to see the two wits going at it, but, when we look deeper, there is an edge of seriousness behind their words. After they list conditions, Mirabell says: MIRABELL. These provisos admitted, in other things I may prove a tractable and complying husband. Love may be the basis of their relationship, as Mirabell appears honest; however, their alliance is a sterile romance, devoid of the touchy, feely stuff, which one should hope for in a courtship. Mirabell and Millamant are two wits perfect for each other in the battle of the sexes; nevertheless, the pervading sterility and greed reverberates as the relationship between the two wits becomes much more confusing. But then, that is the way of the world. Confusion and deception are the way of the world, but compared to The Country Wife and other earlier drama, Congreves play shows a different kind of chaos, one marked with contracts and greed instead of the hilarity and mix-up of Horner and other rakes. The evolution of society, as mirrored by the plays themselves is apparent. Sources 1. Drabble, Margaret , The Oxford Companion to English Literature 2. The Norton Anthology of English Literature, The Major Authors, Sixth Edition 3. Abjadian, Amrollah, Dr., A Survey of English Literature (II) 4. Patterson, Michael, The Oxford Dictionary of Plays 5. Abrams, M.H., A Glossary of Literary Term, Eighth Edition 6. William Wycherley, The Country Wife, 1675 7. William Congreve, The Way of the World, 1700

A Woman Mourned By Daughters: An Analysis :: essays research papers

A Woman Mourned By Daughters: An Analysis   Ã‚  Ã‚  Ã‚  Ã‚  Ã¢â‚¬Å"A Woman Mourned by Daughters†, by Adrienne Rich, is a very descriptive poem in which two women are speaking to their dead mother. There are several parts to this poem starting from the when the mother dies, and moving gradually backward to when the daughters were young girls.   Ã‚  Ã‚  Ã‚  Ã‚  It begins with the daughters sitting in their mothers kitchen, â€Å"mourning† over their mothers death, only they aren't upset or crying (Lines 1-3). They are â€Å"spent† (drained and tired) from all the pressure their mother put on them, before and after she died.   Ã‚  Ã‚  Ã‚  Ã‚  The next section (Lines 4-10) is a description of their dead mother as a persistent presence in their lives. They are so burdened by the power she still carries over them, even though she is no longer living.   Ã‚  Ã‚  Ã‚  Ã‚  They proceed in speaking about her as an elderly woman, weak and frail, â€Å" a straw blown on the bed† (Lines 11-14). The describe her on her death bed. â€Å" Like a corpse pulled from the sea†.   Ã‚  Ã‚  Ã‚  Ã‚  In the fourth section (Lines 15-20) they discuss that what upsets them now that she is gone, isn't the fact that she died, it is all the things that she used to do to them. A knot forms in their throats (â€Å"what rises in our throats like the food you prodded in†) as they think about how they used to be treated.   Ã‚  Ã‚  Ã‚  Ã‚  After the mother dies, the daughters are left with several responsibilities which are discussed in the next section (Lines 22-28). These responsibilities are not ones which the daughters would be happy to take care of. They are so hateful toward their mother and the problems she left are only a burden to them. They feel that they are still being pushed around even after she is dead. Even the thought of taking care of their sick and dying father is thought of as a chore instead of a blessing.   Ã‚  Ã‚  Ã‚  Ã‚  The final section of this poem (Lines 29-33) basically states that if they do something, and it isn't exactly the way their mother would have wished it done, they will be punished. They will feel the guilt from their mother, from beyond the grave, if they do not do things the way she did them, or would

How Do You Define Advice :: Defintion Essays

How Do You Define "Advice" Advice, in my mind, is a form of one person helping another person out; whether it is in words or actions. About 90% of the time, I believe advice comes in the form of words. Advice can be verbally spoken to somebody, or typed/written and given to somebody. In either example, it's advice that's being given to help somebody out. The other way I mentioned was advice given by actions. In my own life, I'm trying to quit smoking cigarettes and finding it hard; especially when I look around and see others doing it. However, the advice I receive when I look around are from those not smoking and those hacking and spitting because they smoke. It's sort of subliminal for me in the sense that I'll be hacking and spitting if I don't quit. So they're giving advice to me in the form of their actions. In mentioning what advice is and how it's given, I ask myself how it works. This happens to be a rough question seeing how advice isn't this little piece of gum on the bottom of my shoe that I can just pick off and toss away. So know I find help in the example of John Sweat and his mechanic friend to help explain how advice works. John was stuck in a pickle jar and wasn't sure what to do. But his friend knew where he was in the jar (because he had been there himself), and decided to offer some advice. John was able to get unstuck because he listened to his friend and took his advice, believing that his friend knew what he was speaking about, and sensing his sincerity. By looking at this example, I have come to the conclusion that advice works when one person takes a conscious (or in my smoking example - an unconscious) effort, to give somebody an honest, experienced point-of-view about a situation in order to give that person help. From there, the advice will only work if the person receiving the advice takes it to heart and uses it. OK, so if this is how it works, what are some ways that it doesn't work? Well, it doesn't work when the advice giver is trying to use his advice given for his own personal gain. I believe the dark forces are at work here and therefore, they cannot succeed! Another way advice given doesn't work is when the person receiving the advice doesn't take it, like in my example of getting advice from my Dad.

Non Tariff Barriers

NON TARIFF BARRIERS What are non tariff barriers? Non- tariff barriers are broadly defined as any impediment to trade other than tariffs. Non tariff barriers can be classified into two groups; Direct and Indirect. (a)Direct Barriers are barriers that specifically limit import of goods or services. Eg: Embargoes and quotas EMBARGOES: Embargoes are the most restrictive of the direct non tariff barriers. They are either a complete ban on trade with a foreign nation or a ban on sales or transfer of specific products. Eg: The U. S. has imposed embargoes on Afghanistan, Cuba, Iraq and Iran. QUOTAS: Quotas are a quantitative restriction on imports. They are based on either value of goods or on quantity. They can be placed on all goods of a particular kind coming from all countries, a group of countries or only one country. (b) Indirect Barriers are laws, administrative regulations, industrial/commercial practices and even social and cultural forces that either limit or discourage sale or purchase of foreign goods or services in a domestic market. To restrict imports, countries may impose monetary or exchange controls on currencies. Foreign governments can impose technical barriers to trade, for example, performance standards for products, product specifications or products safety. Eg: Japan has governmental restrictions on the use of food preservatives. It is a trade barrier in disguise, because foods without preservatives cannot be transported long distance. Import Licensing Schemes and Customs Procedures Some governments require importers to apply for permission to import products, subjecting them to complex and discriminatory requirements. It is often expensive and time-consuming. Let us look at some tariff measures that are maintained against Indian exports: 1)Country- The United States of America Product- Marine Products Non tariff barrier- Increased in-detailed inspections under the Bio-Terrorism Act. -Customs Bond requirement -Mandatory labeling discriminating ‘farm-raised’ & ‘wild’. -Punitive fines in case of non-compliance -Non-recognition of EIC certification 2)Country- Columbia Product- Pharmaceuticals Non tariff barrier – Registration by Columbian Drug Control and Certification takes 11-12 months and is very tedious. Inspections are undertaken for environmental compliance and punitive fines are levied in case of non-compliance 3)Country- Bangladesh Product- Poultry products Non tariff barrier- Bangladesh continues to ban imports of poultry products despite India gaining the ‘Avian influenza free’ status. )Country- Chile Product- Wheat, wheat flour, sugar Non tariff barrier- Complex price band system -A minimum import price (well above international and domestic prices) is stipulated. The Argentinean Customs can ask for validation of Indian Customs Invoice and a full set of original documents if they suspect that the invoiced value is less than the minimum import price established. 5)Country- China Service- Banking Non tariff barrier- China maintains a number of regulatory barriers which make investment in the banking sector very difficult. While foreign banks are allowed to open branches, regulatory treatment remains discriminatory. Branches of foreign banks are for example subject to higher capital norms than Chinese banks, which moreover are coupled with the number of their offices. Costs for establishing bank branches in China are therefore very high and foreign banks market share in China remains marginal REFERENCES International Business Law and its Environment- Richard Schaffer, Filiberto Augusti & Beverly Carle International Business- Francis Cherunilam

My Summer Vacation Essay

Relaxing out in the sun in the middle of a lake that stretches for miles and miles, is probably one of the most amazing things you could ever see in life. The best part about that, I get to enjoy that every summer. Every summer my family goes to a small cabin on Lake Rainy in Canada. The most memorable time I have ever had with my family was at our family cabin in Canada. It was the summer of 2007 and also one of the hottest trips we’ve had at our cabin. One of my favorite things about the cabin is that it has no electricity unless we have the generator on. My brothers whined about that for the first couple days! Bubba even tried to convince Aunt Linda to turn on the generator just so he could watch a movie. With no success with my aunt he asked Uncle Tom and got his way. After the kids got the idea that there would be no more turning the generator on for little things like charging their Game Boys, things actually started to get better. With almost all technology set aside we did things unheard of in this day in age. One night we decided we were tired of being bored and I thought my little brother to play Kings Corner, they didn’t like that game very much. I decided it was time for a little easier game; it would have to be easy to catch Bubba’s attention. Uno was the game we played most nights. Playing Uno at the cabin was great, the entire family was ordered to play by my Aunt Linda and since she is the boss, no one would have even thought otherwise. Don’t get me wrong we didn’t spend all of our time indoors. We went swimming very frequently, most of the time just to stay cool. It was usually too hot to go fishing, unless you had a death wish. One day when it was cool enough to fish, Kelsey caught the most beautiful Walleye I have ever seen. My little cousin Kimmy wasn’t to excited about eating fish so the made her chicken every night we had fish. (This was most nights. ) The only thing I hated about Canada honestly was leaving. On the last day we’re at the cabin everyone is usually pretty sad to be leaving. It was always nice to get home, but as soon as we would get home we would instantly start to miss watching the sunset on a lake that stretched for miles and miles.