Research on the influence of behavioral forces that motivate trader behavior and sentiment: A prospect theory exegesis

This study focuses on empirical investigations and seeks implications by utilizing three different methodologies to test various aspects of trader behavior. The first methodology utilizes Prospect Theory to determine trader behavior during periods of extreme wealth contracting periods. Secondly, a threshold model to examine the sentiment variable is formulated and thirdly a study is made of the contagion effect and trader behavior. ^ The connection between consumers' sense of financial well-being or sentiment and stock market performance has been studied at length. However, without data on actual versus experimental performance, implications based on this relationship are meaningless. The empirical agenda included examining a proprietary file of daily trader activities over a five-year period. Overall, during periods of extreme wealth altering conditions, traders "satisfice" rather than choose the "best" alternative. A trader's degree of loss aversion depends on his/her prior investment performance. A model that explains the behavior of traders during periods of turmoil is developed. Prospect Theory and the data file influenced the design of the model. ^ Additional research included testing a model that permitted the data to signal the crisis through a threshold model. The third empirical study sought to investigate the existence of contagion caused by declining global wealth effects using evidence from the mining industry in Canada. Contagion, where a financial crisis begins locally and subsequently spreads elsewhere, has been studied in terms of correlations among similar regions. The results provide support for Prospect Theory in two out of the three empirical studies. ^ The dissertation emphasizes the need for specifying precise, testable models of investors' expectations by providing tools to identify paradoxical behavior patterns. True enhancements in this field must include empirical research utilizing reliable data sources to mitigate data mining problems and allow researchers to distinguish between expectations-based and risk-based explanations of behavior. Through this type of research, it may be possible to systematically exploit "irrational" market behavior. ^

Lan American Coups: Have They Vanished or Taken New Shapes?

In the following pages, three well-known Latinoamericanists share their views on the current prospects for coups in Latin America. They are: Rut Diamint of the University Torcuatto de Tella in Buenos Aires, Argentina; Pablo Policzer of the University of Calgary in Canada; and Michael Shifter of the Inter-American Dialogue in Washington, DC. Each looks at the potential for coups from different perspectives but, all three come to similar conclusions. That is, that despite substantial gains in democracy, the threat of coups in Latin America remains latent. The authors agree that democracy is growing in the region. Opinion surveys such as the Americas Barometer consistently show that citizens in Latin America have gradually incorporated democracy as part of their core value system. Yet, the authors argue convincingly that Latin America faces new types of interruptions to its democratic process that should be considered coups, even if not following the traditional style of military coup that predominated in the past. Situations that have taken place in Peru, Ecuador, Nicaragua, Honduras and other countries serve to illustrate the new trends. More specifically, Professor Diamint argues that in Latin America a culture of intolerance, demonization of the opposition, and the utilization of any method to achieve power prevails. In a region with a very high threshold of violence, governments fail to set an example of establishing a culture of debate, consensus, and transparency. This culture is inclined to uncontrollable political expressions, preferring confrontational means to resolve conflict. Within this scenario, “messianic” solutions are promoted and coups cannot be discarded as an option that would never transpire. Professor Policzer looks more closely to the constitutional loopholes that allow for a transformation of limited into absolute power. He argues that coups can be constitutional or unconstitutional, and that a constitutional coup can occur when violations to democracy actually stem from the constitutions themselves. In Honduras, for example specific provisions in the Constitution itself created conditions for a constitutional crisis; similar provisions have also led to constitutional authoritarianism in Venezuela and other countries. Dr. Policzer stresses that when a head of state or the military take absolute power, even temporarily, based on provisions in their constitutions; they are in essence staging a constitutional coup. These blind spots in constitutions, he argues, may be more serious threat to democracy than that of traditional coups. Lastly, Dr. Shifter argues that some kind of coup should be expected in Latin America in coming years, not only because fundamental institutions remain weak in some countries, but because the regional political environment is less prepared to respond effectively to transgressions than it was a few years ago. The good news, however, is that only a handful of countries, show no interest in governing. The bad news is that in those few countries where situations are indeed shaky, they are also in some cases aggravated by rising food and fuel prices, and spreading criminality, which pose serious risks to the rule of law and democratic governance.

Research on the influence of behavioral forces that motivate trader behavior and sentiment- a prospect theory exegesis

This study focuses on empirical investigations and seeks implications by utilizing three different methodologies to test various aspects of trader behavior. The first methodology utilizes Prospect Theory to determine trader behavior during periods of extreme wealth contracting periods. Secondly, a threshold model to examine the sentiment variable is formulated and thirdly a study is made of the contagion effect and trader behavior. The connection between consumers' sense of financial well-being or sentiment and stock market performance has been studied at length. However, without data on actual versus experimental performance, implications based on this relationship are meaningless. The empirical agenda included examining a proprietary file of daily trader activities over a five-year period. Overall, during periods of extreme wealth altering conditions, traders "satisfice" rather than choose the "best" alternative. A trader's degree of loss aversion depends on his/her prior investment performance. A model that explains the behavior of traders during periods of turmoil is developed. Prospect Theory and the data file influenced the design of the model. Additional research included testing a model that permitted the data to signal the crisis through a threshold model. The third empirical study sought to investigate the existence of contagion caused by declining global wealth effects using evidence from the mining industry in Canada. Contagion, where a financial crisis begins locally and subsequently spreads elsewhere, has been studied in terms of correlations among similar regions. The results provide support for Prospect Theory in two out of the three empirical studies. The dissertation emphasizes the need for specifying precise, testable models of investors' expectations by providing tools to identify paradoxical behavior patterns. True enhancements in this field must include empirical research utilizing reliable data sources to mitigate data mining problems and allow researchers to distinguish between expectations-based and risk-based explanations of behavior. Through this type of research, it may be possible to systematically exploit "irrational" market behavior.

The decolonization of Northwest Community College

In 1996, the authors of the Canadian Royal Commission on Aboriginal Peoples concluded Canadian educational policy had been based on the false assumption of the superiority of European worldviews. The report authors recommended the transformation of curriculum and schools to recognize that European knowledge was not universal. Aboriginal researcher Battiste believes the current system of Canadian education causes Aboriginal children to face cognitive imperialism and cognitive assimilation and that this current practice of cultural racism in Canada makes educational institutions a hostile environment for Aboriginal learners. In order to counter this cultural racism, Battiste calls for the decolonization of education. ^ In 2005, the president of Northwest Community College (NWCC), publicly committed to decolonizing the college in order to address the continuing disparity in educational attainment between Aboriginal and non-Aboriginal learners. Upon the president’s departure in 2010, the employees of NWCC were left to define for themselves the meaning of decolonization. ^ This qualitative study was designed to build a NWCC definition of colonization and decolonization by collecting researcher observations, nine weeks of participant blog postings, and pre and post blog Word survey responses drawn from a purposeful sample of six Aboriginal and six non-Aboriginal NWCC employees selected from staff, instructor and administrator employee groups. The findings revealed NWCC employees held multiple definitions of colonization and decolonization which did not vary between employee groups, or based on participant gender; however, differences were found based on whether the participants were Aboriginal or non-Aboriginal. ^ Both Aboriginal and non-Aboriginal participants thought decolonization was a worthy goal for the college. Aboriginal participants felt hopeful that decolonization would happen in the future and thought decolonization had to do with moving forward to a time when they would be valued, respected, empowered, unashamed, safe, and viewed as equal to non-Aboriginals. Non-Aboriginal participants were unsure if decolonization was possible because it would require going back in time to restore the Aboriginal way of life. When non-Aboriginal participants felt their thoughts were not being valued or they were being associated with colonialism, they felt angry and guarded and were uncomfortable with Aboriginal participants expressing anger towards Colonizers.^

The Decolonization of Northwest Community College

In 1996, the authors of the Canadian Royal Commission on Aboriginal Peoples concluded Canadian educational policy had been based on the false assumption of the superiority of European worldviews. The report authors recommended the transformation of curriculum and schools to recognize that European knowledge was not universal. Aboriginal researcher Battiste believes the current system of Canadian education causes Aboriginal children to face cognitive imperialism and cognitive assimilation and that this current practice of cultural racism in Canada makes educational institutions a hostile environment for Aboriginal learners. In order to counter this cultural racism, Battiste calls for the decolonization of education. In 2005, the president of Northwest Community College (NWCC), publicly committed to decolonizing the college in order to address the continuing disparity in educational attainment between Aboriginal and non-Aboriginal learners. Upon the president’s departure in 2010, the employees of NWCC were left to define for themselves the meaning of decolonization. This qualitative study was designed to build a NWCC definition of colonization and decolonization by collecting researcher observations, nine weeks of participant blog postings, and pre and post blog Word survey responses drawn from a purposeful sample of six Aboriginal and six non-Aboriginal NWCC employees selected from staff, instructor and administrator employee groups. The findings revealed NWCC employees held multiple definitions of colonization and decolonization which did not vary between employee groups, or based on participant gender; however, differences were found based on whether the participants were Aboriginal or non-Aboriginal. Both Aboriginal and non-Aboriginal participants thought decolonization was a worthy goal for the college. Aboriginal participants felt hopeful that decolonization would happen in the future and thought decolonization had to do with moving forward to a time when they would be valued, respected, empowered, unashamed, safe, and viewed as equal to non-Aboriginals. Non-Aboriginal participants were unsure if decolonization was possible because it would require going back in time to restore the Aboriginal way of life. When non-Aboriginal participants felt their thoughts were not being valued or they were being associated with colonialism, they felt angry and guarded and were uncomfortable with Aboriginal participants expressing anger towards Colonizers.