Three essays on the psychology of investment and financial markets

Préface My thesis consists of three essays where I consider equilibrium asset prices and investment strategies when the market is likely to experience crashes and possibly sharp windfalls. Although each part is written as an independent and self contained article, the papers share a common behavioral approach in representing investors preferences regarding to extremal returns. Investors utility is defined over their relative performance rather than over their final wealth position, a method first proposed by Markowitz (1952b) and by Kahneman and Tversky (1979), that I extend to incorporate preferences over extremal outcomes. With the failure of the traditional expected utility models in reproducing the observed stylized features of financial markets, the Prospect theory of Kahneman and Tversky (1979) offered the first significant alternative to the expected utility paradigm by considering that people focus on gains and losses rather than on final positions. Under this setting, Barberis, Huang, and Santos (2000) and McQueen and Vorkink (2004) were able to build a representative agent optimization model which solution reproduced some of the observed risk premium and excess volatility. The research in behavioral finance is relatively new and its potential still to explore. The three essays composing my thesis propose to use and extend this setting to study investors behavior and investment strategies in a market where crashes and sharp windfalls are likely to occur. In the first paper, the preferences of a representative agent, relative to time varying positive and negative extremal thresholds are modelled and estimated. A new utility function that conciliates between expected utility maximization and tail-related performance measures is proposed. The model estimation shows that the representative agent preferences reveals a significant level of crash aversion and lottery-pursuit. Assuming a single risky asset economy the proposed specification is able to reproduce some of the distributional features exhibited by financial return series. The second part proposes and illustrates a preference-based asset allocation model taking into account investors crash aversion. Using the skewed t distribution, optimal allocations are characterized as a resulting tradeoff between the distribution four moments. The specification highlights the preference for odd moments and the aversion for even moments. Qualitatively, optimal portfolios are analyzed in terms of firm characteristics and in a setting that reflects real-time asset allocation, a systematic over-performance is obtained compared to the aggregate stock market. Finally, in my third article, dynamic option-based investment strategies are derived and illustrated for investors presenting downside loss aversion. The problem is solved in closed form when the stock market exhibits stochastic volatility and jumps. The specification of downside loss averse utility functions allows corresponding terminal wealth profiles to be expressed as options on the stochastic discount factor contingent on the loss aversion level. Therefore dynamic strategies reduce to the replicating portfolio using exchange traded and well selected options, and the risky stock.

Social contexts of sports-practicing youths' hazardous drinking.

Sports-practicing youths are at an elevated risk for alcohol use and misuse. Although much attention has recently been given to depicting subgroups facing the greatest threats, little evidence exists on the contexts in which their drinking takes place. Using data from a cross-sectional study on youth sports participation and substance use in the French-speaking part of Switzerland, this study focused on the social contexts associated with hazardous drinking of 894 sports-practicing adolescents aged 16 to 20. Divided between those who had been drunk in the last month (hazardous drinkers, n = 315) and those who had not (n = 579), sports-practicing adolescents were compared on reported gatherings (sports-related, sports-unrelated, mixed) likely linked to their drinking behaviour. Mixed social contexts, followed by sports-unrelated ones, were reported as the most common context by both male and female youths who practiced sports. After controlling for several possible confounders, male hazardous drinkers were more than 3 times more likely to report sports-unrelated social contexts as the most common, compared to sport-related ones, while females were more than 7 times more likely to do so. Our findings seem to indicate that, rather than focusing only on sports-related factors, prevention of alcohol misuse among sports-practicing youths should also pay attention to the social contextualisation of their hazardous drinking.

Effect of changes in the deuterium content of drinking water on the hydrogen isotope ratio of urinary steroids in the context of sports drug testing.

The hydrogen isotope ratio (HIR) of body water and, therefore, of all endogenously synthesized compounds in humans, is mainly affected by the HIR of ingested drinking water. As a consequence, the entire organism and all of its synthesized substrates will reflect alterations in the isotope ratio of drinking water, which depends on the duration of exposure. To investigate the effect of this change on endogenous urinary steroids relevant to doping-control analysis the hydrogen isotope composition of potable water was suddenly enriched from -50 to 200 0/00 and maintained at this level for two weeks for two individuals. The steroids under investigation were 5β-pregnane-3α,20α-diol, 5α-androst-16-en-3α-ol, 3α-hydroxy-5α-androstan-17-one (ANDRO), 3α-hydroxy-5β-androstan-17-one (ETIO), 5α-androstane-3α,17β-diol, and 5β-androstane-3α,17β-diol (excreted as glucuronides) and ETIO, ANDRO and 3β-hydroxyandrost-5-en-17-one (excreted as sulfates). The HIR of body water was estimated by determination of the HIR of total native urine, to trace the induced changes. The hydrogen in steroids is partly derived from the total amount of body water and cholesterol-enrichment could be calculated by use of these data. Although the sum of changes in the isotopic composition of body water was 150 0/00, shifts of approximately 30 0/00 were observed for urinary steroids. Parallel enrichment in their HIR was observed for most of the steroids, and none of the differences between the HIR of individual steroids was elevated beyond recently established thresholds. This finding is important to sports drug testing because it supports the intended use of this novel and complementary methodology even in cases where athletes have drunk water of different HIR, a plausible and, presumably, inevitable scenario while traveling.

Berguer, Rochedieu: Flournoy's legacy in the Genevan school of the psychology of religion

In 1891 Théodore Flournoy (1854-1920) became the first Professor of Psychology to be appointed at the University of Geneva, and his teaching regularly included references to religion. His successor, Georges Berguer, who taught psychology of religion, began as privat-docent in 1910 and received a full professorship in Religious Psychology and the History of Religion in 1928. French-speaking Switzerland is one of the rare places in the world where psychology of religion has been taught continuously since the very beginning of the 20th century. The aim of this article is to shed light on this tradition and especially on Georges Berguer (retired in 1944) and Edmond Rochedieu (retired in 1965) who succeeded Flournoy. This historical enterprise concludes with some reflections on the role of the psychology of religion at the intersection of psychology and the study of religions.

Association of sports club participation with fitness and fatness in children.

Decreased fitness and increased fatness are relevant factors for decreased cardiovascular and bone health in children. One way to increase physical activity and hence fitness and to reduce the risk for overweight might be sports club participation (SCP). PURPOSE: To investigate the association of SCP with fatness and fitness in children in general and in those with increased risk for overweight and/or low fitness. METHODS: A cross-sectional study was conducted in a random sample of 502 first- and fifth-grade primary school children. Fitness components were determined by 10 motor tests and body fatness by the sum of four skinfolds. SCP was defined as participation of at least once a week. RESULTS: Two thirds of all children were participating in a sports club. Girls' and boys' participation rate as well as those of overweight children and of children with overweight parents were comparable to their respective normal weight peers. In contrast, children from migrant families (odds ratio = 0.31; 95% confidence interval = 0.20-0.48) and from inactive parents (odds ratio = 0.16; 95% confidence interval = 0.05-0.45) participated significantly less (all P < 0.001). SCP was associated with endurance (0.53 > beta > 0.37, all P < 0.05) and partly with speed, strength, and coordination (0.41 > beta > 0.18, all P < 0.05). In overweight children and in children from overweight parents and migrant families, this association was not found. There was no association between SCP and fatness in any of the groups. CONCLUSIONS: SCP rates were high and were associated with higher levels of most fitness components in children. Participation rates were lower for children of migrant families and children from inactive parents. In addition, the association between SCP and fitness components was not found in overweight children and in children from overweight parents and migrant families.

A rationalist perspective on the autonomy of international sport governing bodies : towards a pragmatic autonomy in the steering of sports

International sport governing bodies (ISGBs) are built on the foundations of freedom of association and traditionally enjoy a large degree of autonomy in their decision-making. Their autonomy is increasingly confined, however, and their hierarchical self-governance is giving way to a more networked governance, in which different stakeholders exert power in different ways and in different contexts in a complex web of interrelationships. Taking a rationalist perspective on the autonomy of ISGBs, this article demonstrates that ISGBs are deploying strategies to safeguard their waning governing monopoly over international sport. Opting for an inductive approach, the authors present four possible conceptualizations of autonomy as applied to ISGBs, namely political autonomy, legal autonomy, financial autonomy and pyramidal autonomy. For each dimension, they describe the different strategies ISGBs wield in order to safeguard different dimensions of their autonomy. This article uses governance theories to hypothesize that the autonomy of ISGBs can be understood as 'pragmatic autonomy' since ISGBs only cede certain aspects of their autonomy under particular circumstances and when being subject to specific threats. Acting in a rationalist manner, they are able to keep control over governance developments in sport by using indirect and more subtle forms of governance.

Sports-related chronic repetitive head trauma as a cause of pituitary dysfunction.

Traumatic brain injury (TBI) is recognized as a cause of hypopituitarism even after mild TBI. Although over the past decade, a growing body of research has detailed neuroendocrine changes induced by TBI, the mechanisms and risk factors responsible for this pituitary dysfunction are still unclear. Around the world, sports-especially combative sports-are very popular. However, sports are not generally considered as a cause of TBI in most epidemiological studies, and the link between sports-related head trauma and hypopituitarism has not been investigated until recently. Thus, there is a paucity of data regarding this important concern. Because of the large number of young sports participants with near-normal life expectancy, the implications of undiagnosed or untreated postconcussion pituitary dysfunction can be dramatic. Understanding the pathophysiological mechanisms and risk factors of hypopituitarism caused by sports injuries is thus an important issue that concerns both medical staff and sponsors of sports. The aim of this paper was to summarize the best evidence for understanding the pathophysiological mechanisms and to discuss the current data and recommendations on sports-related head trauma as a cause of hypopituitarism.

On the use of mobile inflatable hypoxic marquees for sport-specific altitude training in team sports.

BACKGROUND/AIM: With the evolving boundaries of sports science and greater understanding of the driving factors in the human performance physiology, one of the limiting factors has now become the technology. The growing scientific interest on the practical application of hypoxic training for intermittent activities such as team and racket sports legitimises the development of innovative technologies serving athletes in a sport-specific setting. METHODS: Description of a new mobile inflatable simulated hypoxic equipment. RESULTS: The system comprises two inflatable units-that is, a tunnel and a rectangular design, each with a 215 m(3) volume and a hypoxic trailer generating over 3000 Lpm of hypoxic air with FiO₂ between 0.21 and 0.10 (a simulated altitude up to 5100 m). The inflatable units offer a 45 m running lane (width=1.8 m and height=2.5 m) as well as a 8 m × 10 m dome tent. FiO₂ is stable within a range of 0.1% in normal conditions inside the tunnel. The air supplied is very dry-typically 10-15% relative humidity. CONCLUSIONS: This mobile inflatable simulated hypoxic equipment is a promising technological advance within sport sciences. It offers an opportunity for team-sport players to train under hypoxic conditions, both for repeating sprints (tunnel configuration) or small-side games (rectangular configuration).