...psychology of investors. In this approach, security expected returns are determined by both risk and misvaluation. This survey sketches a framework for understanding decision biases, evaluates the a priori arguments and the capital market evidence bearing on the importance of investor psychology for security prices, and reviews recent models. The best plan is . . . to profit by the folly of others. — Pliny the Elder, from John Bartlett, comp. Familiar Quotations, 9th ed. 1901. IN THE MUDDLED DAYS BEFORE THE RISE of modern finance, some otherwisereputable economists, such as Adam Smith, Irving Fisher, John Maynard Keynes, and Harry Markowitz, thought that individual psychology affects prices.1 What if the creators of asset-pricing theory had followed this thread? Picture a school of sociologists at the University of Chicago proposing the Deficient Markets Hypothesis: that prices inaccurately ref lect all available information. A brilliant Stanford psychologist, call him Bill Blunte, invents the Deranged Anticipation and Perception Model ~or DAPM!, in which proxies for market misvaluation are used to predict security returns. Imagine the euphoria when researchers discovered that these mispricing proxies ~such * Hirshleifer is from the Fisher College of Business, The Ohio State University. This survey was written for presentation at the American Finance Association Annual Meetings in New Orleans, January, 2001. I especially thank the editor, George Constantinides,...
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...RICHARD DAWKINS-The Selfish Gene. Ebook v1.0. 'Who should read this book? Everyone interested in the universe and their place in it.' Jeffrey R. Baylis, Animal Behaviour Our genes made us. We animals exist for their preservation and are nothing more than their throwaway survival machines. The world of the selfish gene is one of savage competition, ruthless exploitation, and deceit. But what of the acts of apparent altruism found in nature-the bees who commit suicide when they sting to protect the hive, or the birds who risk their lives to warn the flock of an approaching hawk? Do they contravene the fundamental law of gene selfishness? By no means: Dawkins shows that the selfish gene is also the subtle gene. And he holds out the hope that our species-alone on earth-has the power to rebel against the designs of the selfish gene. This book is a call to arms. It is both manual and manifesto, and it grips like a thriller. The Selfish Gene, Richard Dawkins's brilliant first book and still his most famous, is an international bestseller in thirteen languages. For this new edition there are two major new chapters. 'learned, witty, and very well written...exhilaratingly good.' Sir Peter Medawar, Spectator Richard Dawkins is a Lecturer in Zoology at Oxford University and a Fellow of Mew College, and the author of The Blind Watchmaker. Preface to 1976 edition This book should be read almost as though it were science fiction. It is designed to appeal to the imagination. But it is not science...
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...Psychological Review 2005, Vol. 112, No. 3, 629 – 649 Copyright 2005 by the American Psychological Association 0033-295X/05/$12.00 DOI: 10.1037/0033-295X.112.3.629 Toward a More Pragmatic Approach to Morality: A Critical Evaluation of Kohlberg’s Model Dennis L. Krebs and Kathy Denton Simon Fraser University In this article, the authors evaluate L. Kohlberg’s (1984) cognitive– developmental approach to morality, find it wanting, and introduce a more pragmatic approach. They review research designed to evaluate Kohlberg’s model, describe how they revised the model to accommodate discrepant findings, and explain why they concluded that it is poorly equipped to account for the ways in which people make moral decisions in their everyday lives. The authors outline in 11 propositions a framework for a new approach that is more attentive to the purposes that people use morality to achieve. People make moral judgments and engage in moral behaviors to induce themselves and others to uphold systems of cooperative exchange that help them achieve their goals and advance their interests. Keywords: moral development, cognitive development, cooperation, moral judgment After two decades of research on Kohlberg’s (1984) cognitive– developmental model of morality, we abandoned it in favor of a more pragmatic approach. In this article, we explain why. We identify problems with Kohlberg’s model, describe revisions aimed at solving them, and offer reasons why a new approach is necessary...
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...THE B L A C K SWAN The HIGHLY I mpact IM of the PROBABLE Nassim Nicholas Taleb U.S.A. $26.95 Canada $34.95 is a highly improbable event with three principal characteristics: It is unpre dictable; it carries a massive impact; and, after the fact, we concoct an explanation that makes it appear less random, and more predictable, than it was. The astonishing success of Google was a black swan; so was 9 / 1 1 . For Nassim Nicholas Taleb, black swans underlie almost everything about our world, from the rise of religions to events in our own personal lives. A BLACK SWAN Why do we not acknowledge the phenomenon of black swans until after they occur? Part of the answer, according to Taleb, is that humans are hardwired to learn specifics when they should be focused on generalities. We concentrate on things we already know and time and time again fail to take into consideration what we don't know. We are, therefore, unable to truly estimate oppor tunities, too vulnerable to the impulse to simplify, narrate, and categorize, and not open enough to rewarding those who can imagine the "impossible." For years, Taleb has studied how we fool our selves into thinking we know more than we actually do. We restrict our thinking to the irrelevant and inconsequential, while large events continue to surprise us and shape our world. Now, in this reve latory book, Taleb explains everything we know about what we don't know. He offers...
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...IIBM Institute of Business Management Corporate Governance www.iibmindia.in Chapter 1 Corporate Governance Corporate governance refers to the system by which corporations are directed and controlled. The governance structure specifies the distribution of rights and responsibilities among different participants in the corporation (such as the board of directors, managers, shareholders, crors, auditors, regulators, and other stakeholders) and specifies the rules and procedures for making decisions in corporate affairs. Governance provides the structure through which corporations set and pursue their objectives, while reflecting the context of the social, regulatory and market environment. Governance is a mechanism for monitoring the actions, policies and decisions of corporations. Governance involves the alignment of interests among the stakeholders. There has been renewed interest in the corporate governance practices of modern corporations, particularly in relation to accountability, since the high-profile collapses of a number of large corporations during 2001–2002, most of which involved accounting fraud. Corporate scandals of various forms have maintained public and political interest in the regulation of corporate governance. In the U.S., these include Enron Corporation and MCI Inc. (formerly WorldCom). Their demise is associated with the U.S. federal government passing the Sarbanes-Oxley Act in 2002, intending to restore public confidence in corporate...
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...Core study 1 Asch 1955 : Aims and Context Summarise the aims and context of Asch’s 1955) research opinions and social pressure An individual is said to conform if they chose to study a course of action that is favoured by the majority or that is considered socially acceptable .When an individual is influenced by how the majority of people think this is considered socially acceptable Conformity is a form of social influence that results from exposure to the majority position , the tendency for people to adopt the behaviour, attitudes and values of other members of a reference groups, This was a study of conformity in an ambiguous situation ‘unclear’. Jenness asked students to guess how many beans there were in a jar,they were then asked to discuss in groups. Lastly they were asked to give their estimates again, individuals estimates tended to converge to the group norm.It seems reasonable that when in an ambiguous situation (were the answer isn't obvious ) we look to others to get some ideas about behaviour . Jenness's research is limited as he specifically asked participants to produce a group estimate rather than just observing if they would produce group estimates. Sherif conducted a similar investigation into responses to an ambiguous stimulus using the auto kinetic effect ( this is where a stationary spot of light projected on to a screen appears to move) Sherif told participants he was going to move the light , he asked the pp’s to estimate by how far the spotlight...
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