New Economics Papers
on Neuroeconomics
Issue of 2010‒11‒13
five papers chosen by

  1. Overconfidence, risk aversion and (economic) behavior of individual traders in experimental asset markets By Michailova, Julija
  2. Overconfidence and bubbles in experimental asset markets By Michailova, Julija
  3. To care or to fight: must primate males choose? By Daniel Levitis; Laurie Bingaman Lackey
  4. Human longevity and post-fertile survival are not predicted by primate allometric patterns By Daniel Levitis; Laurie Bingaman Lackey
  5. Ecological, Heterodox and Neoclassical Economics: Investigating the Differences By Spash, Clive L.; Ryan, Anthony M.

  1. By: Michailova, Julija
    Abstract: In this paper influence of behavioral factors (overconfidence and risk aversion) on financial decision making of economic subjects is analyzed. For this purpose two kinds of experiments were conducted: asset market and risk aversion experiments. In conducted asset market sessions subjects, based on their pre-experimental overconfidence scores, were assigned to two types of markets: the least overconfident ones formed five “rational” markets and the most overconfident ones formed five “overconfident” markets. Data collected from ten experimental sessions revealed that individual performance and trade activity were overconfidence dependent. Even small variations in miscalibration among players of the same “type”, comprising each of the asset markets, were sufficient to cause this effect. In the second part of experiment, post hoc assessment of risk aversion was implemented in a sample of former participants of the asset market experiment (32 persons). The presented evidence suggests that risk aversion was not among the factors that had influence on individual engagement in trade activity or performance. It was concluded that in the sample, for which risk aversion measurements were obtained, experimental market outcomes were overconfidence and not risk aversion driven.
    Keywords: overconfidence; individual behavior; experiment.
    JEL: D81 G11 C90 C91
    Date: 2010
  2. By: Michailova, Julija
    Abstract: In this paper relationship between the market overconfidence and occurrence of the stock-prices’ bubbles is investigated. Sixty participants traded in ten experimental markets of the two types: rational and overconfident. Markets are constructed on the basis of subjects’ overconfidence, measured in the administered pre-experimental psychological test sessions. The most overconfident subjects form overconfident markets, and the least overconfident – rational markets. Empirical evidence presented in the paper refines differences between market outcomes in the experimental treatments and suggests the connection between market overconfidence and market outcomes. Prices in rational markets tend to track the fundamental asset value more accurately than prices in overconfident markets, and are significantly lower and less volatile than the average overconfident prices. Strong positive correlation between market outcomes and overconfidence measures draws conclusion, that an increase in market overconfidence is associated with the increase in average price and trading activity. Large and significant correlation between bubble measures and measures of overconfidence provide additional evidence that overconfidence has significant effect on price and trading behavior in experimental asset markets.
    Keywords: overconfidence; price bubbles; experimental asset market.
    JEL: G12 C92
    Date: 2010
  3. By: Daniel Levitis (Max Planck Institute for Demographic Research, Rostock, Germany); Laurie Bingaman Lackey
    Abstract: Females in all mammalian species care for their offspring, while most mammalian males do not. This failure of paternal investment is generally explained in terms of a trade-off between paternal care and mating competition. While there has been great interest in the optimal pattern of investment in paternal care versus mating effort, comparative evidence that such a trade-off exists has not been published for any large group of mammal species. We employ comparative data on primates to test for such a trade-off. Across primate species, the degree to which males engage in direct care of young is inversely related to levels of overt male-male conflict, and to canine dimorphism, a morphological measure associated with male-male conflict. When phylogeny is taken into account, there is no significant relationship between sex-biased longevity and whether males engage in care, implying that investment in care and investment in competition are functional alternatives to each other. Males of most primate species engage in either intensive direct care, or intense or frequent intrasexual competition, but not both. The hypothesis that investment in care and in intrasexual conflict are alternative strategies is strongly supported.
    JEL: J1 Z0
    Date: 2010–10
  4. By: Daniel Levitis (Max Planck Institute for Demographic Research, Rostock, Germany); Laurie Bingaman Lackey
    Abstract: The tendency of women to outlive their own fertility has been explained allometrically, with age at reproductive cessation attributed to ovarian follicle depletion in allometrically appropriate ovaries, and longevity related to brain and body scaling. However, because women's age at reproductive cessation is extraordinarily early compared to their longevity, we question whether both of these aspects of our demography can be predicted from primate allometric patterns. We employ a measure of longevity more useful for interspecies comparisons than the traditionally used maximum longevity to examine these allometric patterns. Using information-criterion based model selection, we find that brain size alone, rather than body size or their combined effects, produces preferred predictive models of longevity and of age at reproductive cessation. These models predict human longevity of 54-60 years, well below observed values, but accurately predict women's age at reproductive cessation. Rejecting previous conclusions, we find that human longevity, and; therefore, human post-fertile survival, are not predicted by primate patterns. We suggest that women's allometrically inappropriate longevity, and post-fertile survival, cannot be sufficiently explained in terms of proximate and phylogenetic constraints, and must be explained in terms of the unusual selective costs and benefits experienced by older women.
    Keywords: evolution
    JEL: J1 Z0
    Date: 2010–10
  5. By: Spash, Clive L.; Ryan, Anthony M.
    Abstract: How heterodox are ecological economists and how ecological are heterodox economists? How do both differ, if at all, from neoclassical economists when addressing environmental problems? In 2009 we probed such questions by conducting an international survey at economic conferences on the environment and sustainability. This paper reports on surveys conducted at conferences of the European Society for Ecological Economics, the European Association of Environmental and Resource Economics, and the Association of Heterodox Economists. A key aim was to gain insight into the extent to which ecological economics can be described as a distinct field of research from orthodox environmental and resource economics. Conflict within the field has meant a prevalence of neoclassical articles and thought mixed in amongst more heterodox work. The question then arises are those participating in ecological economics ideologically and methodologically similar to those schools of thought falling under the heterodox economic umbrella or the orthodox? In addressing this question problems are identified with economic understanding of environmental problems and the lack of communication across schools and disciplines. Suggestions are made as to how we might, as a community of concerned scholars and activists, move forward.
    Keywords: Ecological economics; heterodox; neoclassical; methodology; ideology
    JEL: B40 Q0 B59
    Date: 2010–10–29

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