Aspirations or survival: decision modeling and the effect of focus of attention in risky choice

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Guy Moshe Ross
Keyword(s):  
Risk Taking ◽  
Reference Point ◽  
Effect Study ◽  
Focus Of Attention ◽  
Risky Choice ◽  
Reference Points ◽  
Aspiration Level ◽  
Content Type ◽  
Randomized Controlled Studies ◽  
Risky Option

Purpose This research aims to test focus of attention effects in risky choice. Design/methodology/approach As opposed to traditional aspiration-level theory, the shifting-focus concept introduces a second reference point, the survival point, and assumes a shifting focus of attention between the two reference points. In this conceptualization, risk-taking is a function of focus of attention on the survival reference point or the aspiration-level and resources relative to the two reference points. Four randomized controlled studies tested this concept. Findings Study 1 showed that with aspiration focus the probability of choosing a risky option was higher below an aspiration-level than above it. With survival focus, the effect was reversed. Study 2 found that close to the survival reference point, the probability of choosing a risky option was higher with aspiration focus relative to survival focus. Study 3 revealed that with scarce resources the risk taken was higher with aspiration focus than with survival focus, and the scarcer the resources the stronger was the effect. Study 4 demonstrated that with aspiration focus the risk taken was higher below an aspiration-level than above it. With survival focus the effect was reversed. Originality/value In addition to providing support for the validity of the shifting focus concept, this paper elaborates on the theoretical model by providing evidence for moderation effects. Risk-taking was affected by a focus of attention on one of two reference points, and the effect was moderated by resources relative to the two focal points. An advanced model is proposed to capture the effects of focus of attention and resources on risk-taking behavior.

Reference points and method of payment in mergers

2018 ◽  
Vol 44 (2) ◽  
pp. 278-290
Author(s):  
Inga Chira ◽  
Jeff Madura
Keyword(s):  
Behavioral Finance ◽  
Reference Point ◽  
Reference Points ◽  
Content Type ◽  
Optimal Mix ◽  
Prefer Stock ◽  
Method Of Payment ◽  
The Impact ◽  
To Receive ◽  
Practical Implications

Purpose The purpose of this paper is to examine the impact of the target and bidder reference points on the method of payment in mergers. When considering initial and final results for target and bidder, the target appears to have more negotiating power than the bidder in achieving the financial mix preference that was initially articulated. Design/methodology/approach The authors examine the impact of target and bidder reference points on the consideration sought by the target and the consideration offered by the bidder. The authors test whether the target reference points has an impact on the final method of payment agreed upon by the target and the bidder. Findings The authors find that targets with a longer distance to their respective target reference points prefer to receive cash financing in the consideration sought, while bidders with a longer distance to their respective reference points prefer stock financing in consideration offered. The authors also find evidence that target’s longer distance to its reference point is associated with the use of cash over stock, while the bidder reference point has no impact on the final method of payment used in the merger. Practical implications These insights may be used by the management to formulate the optimal mix of financing in M&A transactions. Originality/value This is an original paper exploring the effect of behavioral finance on corporate decision making.

Mathematical theory of stereotactic coordinate transformation: elimination of rotational targeting error by addition of a third reference point

2000 ◽  
Vol 92 (5) ◽  
pp. 884-888 ◽  
Author(s):  
Ethan Taub
Keyword(s):  
Coordinate Transformation ◽  
Reference Point ◽  
Magnetic Resonance Images ◽  
Reference Points ◽  
New Method ◽  
Midsagittal Plane ◽  
Content Type ◽  
Stereotactic Frame ◽  
Stereotactic Atlas ◽  
Source Of Error

✓ All frame-based stereotactic procedures require localization of an anatomical target within the coordinate system of the stereotactic frame. If the target is defined by its coordinates given in a stereotactic atlas (indirect localization), the neurosurgeon faces the mathematical task of transforming atlas coordinates into frame coordinates. In the method usually used, the frame coordinates of two reference points (the anterior and posterior commissures) are obtained from computerized tomography or magnetic resonance images, and serve as the basis for the coordinate transformation. This two-point algorithm relies on the additional assumption that the frame sits on the patient's head without exhibiting roll, that is, rotation about the anteroposterior axis (y axis). Usually this assumption is nearly, but not exactly, correct. An amount of roll as small as 3° can cause a targeting error on the order of 1 mm when a two-point algorithm is used. This potential source of error can be eliminated by using a new method of coordinate transformation, the derivation of which is mathematically reported in this article. The new method requires a third reference point located in the midsagittal plane, in addition to the two commissural reference points.

scholarly journals Betrayal Aversion: Evidence from Brazil, China, Oman, Switzerland, Turkey, and the United States: Comment

2010 ◽  
Vol 100 (1) ◽  
pp. 628-633 ◽  
Author(s):  
Gary E Bolton ◽  
Axel Ockenfels
Keyword(s):  
United States ◽  
Risk Taking ◽  
The United States ◽  
Risky Choice ◽  
The Other ◽  
Binary Choice ◽  
Risk Averse ◽  
Personal Risk ◽  
Risky Option ◽  
Betrayal Aversion

In a series of binary choice problems, we investigate how a chooser's risk taking changes when others share in their personal risk, either equally or unequally. We find that when the safe option yields inequality, the risky option is taken significantly more often. On the other hand, the inequality resulting from the risky choice does not affect risk taking. We also find that choosers tend to be less risk-averse in a one-person context compared to when the risk also affects the payoff of another. (C72, D81, Z13)

Risky-Choice Behavior: A Life-Span Analysis

1988 ◽  
Vol 27 (1) ◽  
pp. 25-33 ◽  
Author(s):  
Stephen G. Holliday
Keyword(s):  
Older Adults ◽  
Risk Taking ◽  
Choice Behavior ◽  
Risky Choice ◽  
Choice Situation ◽  
General Strategy ◽  
Safe Alternative ◽  
Younger Adults ◽  
Age Cohorts ◽  
Risky Option

The purpose of the present study was to systematically test the hypothesis that older people adopt risk-avoiding strategies when faced with risky-choice situations. Ninety-six adults, representing four age cohorts, filled out a risk-taking questionnaire consisting of twelve situations demanding a choice between a safe and a risky option. One-half of the choices involved potential losses, the other half involved potential gains. The results indicated that older adults choose no more safe alternatives than do younger adults. Additionally, for all age cohorts, risk avoiding was more evident when choices were between risky and certain gains than when choices were between risky and certain losses. This pattern of responding suggests that older adults do not necessarily adopt a general strategy of avoiding risky options when a safe alternative is available. Instead, risk avoiding, for all age cohorts, appears to be influenced by the parameters of the choice situation.

Cognitive Reflection Effects on Time Discounting

2018 ◽  
Vol 39 (2) ◽  
pp. 99-106 ◽  
Author(s):  
Michał Białek ◽  
Przemysław Sawicki
Keyword(s):  
Individual Differences ◽  
Individual Difference ◽  
Delay Discounting ◽  
Reference Point ◽  
Reference Points ◽  
Cognitive Reflection Test ◽  
Process Information ◽  
Time Discounting ◽  
Cognitive Reflection ◽  
The Way

Abstract. In this work, we investigated individual differences in cognitive reflection effects on delay discounting – a preference for smaller sooner over larger later payoff. People are claimed to prefer more these alternatives they considered first – so-called reference point – over the alternatives they considered later. Cognitive reflection affects the way individuals process information, with less reflective individuals relying predominantly on the first information they consider, thus, being more susceptible to reference points as compared to more reflective individuals. In Experiment 1, we confirmed that individuals who scored high on the Cognitive Reflection Test discount less strongly than less reflective individuals, but we also show that such individuals are less susceptible to imposed reference points. Experiment 2 replicated these findings additionally providing evidence that cognitive reflection predicts discounting strength and (in)dependency to reference points over and above individual difference in numeracy.

Disposition effect at the market level: evidence from Indian stock market

2019 ◽  
Vol 12 (2) ◽  
pp. 69-82
Author(s):  
Sravani Bharandev ◽  
Sapar Narayan Rao
Keyword(s):  
Trading Volume ◽  
Stock Exchange ◽  
Reference Points ◽  
Disposition Effect ◽  
Content Type ◽  
Ex Post ◽  
Abnormal Trading Volume ◽  
The Difference ◽  
Trading Volumes ◽  
Indian Stock Market

Purpose The purpose of this paper is to test the disposition effect at market level and propose an appropriate reference point for testing disposition at market level. Design/methodology/approach This is an empirical study conducted on 500 index stocks of NSE500 (National Stock Exchange). Winning and losing days for each stock are calculated using 52-week high and low prices as reference points. To test disposition effect, abnormal trading volumes of stocks are regressed on their percentage of winning (losing) days. Further using ANOVA, the difference between mean of percentage of winning (losing) days of high abnormal trading volume deciles and low abnormal trading volume deciles is tested. Findings Results show that a stock’s abnormal trading volume is positively influenced by the percentage of winning days whereas percentage of losing days show no such effect. Findings are consistent even after controlling for volatility and liquidity. ANOVA results show the presence of high percentage of winning days in higher deciles of abnormal trading volumes and no such pattern in case of losing days confirms the presence of disposition effect. Further an ex post analysis indicates that disposition prone investors accumulate losses. Originality/value This is the first study, which proposes the use of 52-week high and low prices as reference points to test the market-level disposition effect. Findings of this study enhance the limited literature available on disposition effect in emerging markets by providing evidence from Indian stock markets.

scholarly journals The American Marketing Association

2014 ◽  
Vol 6 (4) ◽  
pp. 538-547 ◽  
Author(s):  
Franck Cochoy
Keyword(s):  
Reference Point ◽  
Design Methodology ◽  
Sociology Of Science ◽  
Sociological Analysis ◽  
Content Type ◽  
Common Reference ◽  
Coupling Procedure ◽  
Professional Body ◽  
History Of ◽  
Written Sources

Purpose – This paper aims to explore the sociological process behind the development of the American Marketing Association (AMA). It shows how the shift from isolated endeavors to an organized movement happened in marketing, how and why marketing pioneers merged to build a professional body and what this body provided to its community and to society at large. Design/methodology/approach – This paper studies the history of the AMA from the perspective of the sociology of science and relies on the marketing literature and other written sources. Findings – The paper shows that the AMA is both the result and the center of a coupling procedure. Isolated pioneers in the marketing field found it useful to communicate with those who were engaged in endeavors similar to their own. The meeting resulted in a dialog, and the dialog had necessitated the establishment of the AMA as a common reference point. The AMA provided the marketing community with a language and an institution that could help them to exist and move forward together. Originality/value – This paper provides an up to date account of the history of the AMA as well as a sociological analysis of its development.

scholarly journals ILRS Reference Point Determination Using Close Range Photogrammetry

2021 ◽  
Vol 11 (6) ◽  
pp. 2785
Author(s):  
Michael Lösler ◽  
Cornelia Eschelbach ◽  
Thomas Klügel ◽  
Stefan Riepl
Keyword(s):  
Reference Point ◽  
Reference Points ◽  
Geodetic Reference System ◽  
Unscented Transformation ◽  
Local Ties ◽  
Close Range Photogrammetry ◽  
Crucial Component ◽  
Space Geodetic Techniques ◽  
Close Range ◽  
Point Determination

A global geodetic reference system (GGRS) is realized by physical points on the Earth’s surface and is referred to as a global geodetic reference frame (GGRF). The GGRF is derived by combining several space geodetic techniques, and the reference points of these techniques are the physical points of such a realization. Due to the weak physical connection between the space geodetic techniques, so-called local ties are introduced to the combination procedure. A local tie is the spatial vector defined between the reference points of two space geodetic techniques. It is derivable by local measurements at multitechnique stations, which operate more than one space geodetic technique. Local ties are a crucial component within the intertechnique combination; therefore, erroneous or outdated vectors affect the global results. In order to reach the ambitious accuracy goal of 1 mm for a global position, the global geodetic observing system (GGOS) aims for strategies to improve local ties, and, thus, the reference point determination procedures. In this contribution, close range photogrammetry is applied for the first time to determine the reference point of a laser telescope used for satellite laser ranging (SLR) at Geodetic Observatory Wettzell (GOW). A measurement campaign using various configurations was performed at the Satellite Observing System Wettzell (SOS-W) to evaluate the achievable accuracy and the measurement effort. The bias of the estimates were studied using an unscented transformation. Biases occur if nonlinear functions are replaced and are solved by linear substitute problems. Moreover, the influence of the chosen stochastic model onto the estimates is studied by means of various dispersion matrices of the observations. It is shown that the resulting standard deviations are two to three times overestimated if stochastic dependencies are neglected.

Shareholder risk-taking incentives in the presence of contingent capital

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mahmoud Fatouh ◽  
Ayowande A. McCunn
Keyword(s):  
Risk Taking ◽  
Banking System ◽  
Capital Requirements ◽  
Content Type ◽  
Basic Model ◽  
Conversion Rates ◽  
A Minor ◽  
The Impact ◽  
Practical Implications

Purpose This paper aims to present a model of shareholders’ willingness to exert effort to reduce the likelihood of bank distress and the implications of the presence of contingent convertible (CoCo) bonds in the liabilities structure of a bank. Design/methodology/approach This study presents a basic model about the moral hazard surrounding shareholders willingness to exert effort that increases the likelihood of a bank’s success. This study uses a one-shot game and so do not capture the effects of repeated interactions. Findings Consistent with the existing literature, this study shows that the direction of the wealth transfer at the conversion of CoCo bonds determines their impact on shareholder risk-taking incentives. This study also finds that “anytime” CoCos (CoCo bonds trigger-able anytime at the discretion of managers) have a minor advantage over regular CoCo bonds, and that quality of capital requirements can reduce the risk-taking incentives of shareholders. Practical implications This study argues that shareholders can also use manager-specific CoCo bonds to reduce the riskiness of the bank activities. The issuance of such bonds can increase the resilience of individual banks and the whole banking system. Regulators can use restrictions on conversion rates and/or requirements on the quality of capital to address the impact of CoCo bonds issuance on risk-taking incentives. Originality/value To model the risk-taking incentives, authors generally modify the asset processes to introduce components that reflect asymmetric information between CoCo holders and shareholders and/or managers. This paper follows a simpler method similar to that of Holmström and Tirole (1998).

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