Altruism across disciplines: one word, multiple meanings

Altruism is a deep and complex phenomenon that is analysed by scholars of various disciplines, including psychology, philosophy, biology, evolutionary anthropology and experimental economics. Much confusion arises in current literature because the term altruism covers variable concepts and processes across disciplines. Here we investigate the sense given to altruism when used in different fields and argumentative contexts. We argue that four distinct but related concepts need to be distinguished: (a) psychological altruism, the genuine motivation to improve others' interests and welfare; (b) reproductive altruism, which involves increasing others' chances of survival and reproduction at the actor's expense; (c) behavioural altruism, which involves bearing some cost in the interest of others; and (d) preference altruism, which is a preference for others' interests. We show how this conceptual clarification permits the identification of overstated claims that stem from an imprecise use of terminology. Distinguishing these four types of altruism will help to solve rhetorical conflicts that currently undermine the interdisciplinary debate about human altruism.

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.

An affective approach to moral motivation

Over the last few years, there has been a surge of work in a new field called "moral psychology", which uses experimental methods to test the psychological processes underlying human moral activity. In this paper, I shall follow this line of approach with the aim of working out a model of how people form value judgements and how they are motivated to act morally. I call this model an "affective picture": 'picture' because it remains strictly at the descriptive level and 'affective' because it has an important role for affects and emotions. This affective picture is grounded on a number of plausible and empirically supported hypotheses. The main idea is that we should distinguish between various kinds of value judgements by focusing on the sort of state of mind people find themselves in while uttering a judgement. "Reasoned judgements" are products of rational considerations and are based on preliminary acceptance of norms and values. On the contrary, "basic value judgements" are affective, primitive and non-reflective ways of assessing the world. As we shall see, this analysis has some consequences for the traditional internalism-externalism debate in philosophy; it highlights the fact that motivation is primarily linked to "basic value judgements" and that the judgements we openly defend might not have a particular effect on our actions, unless we are inclined to have an emotional attitude that conforms to them.