Corrigendum: stable matchings and preferences of couples

We correct an omission in the definition of the domain of weakly responsive preferences introduced in Klaus and Klijn (2005) or KK05 for short. The proof of the existence of stable matchings (KK05, Theorem 3.3) and a maximal domain result (KK05, Theorem 3.5) are adjusted accordingly.

Efficient and stable collective choices under gregarious preferences

We consider collective choice problems where a set of agents have to choose an alternative from a finite set and agents may or may not become users of the chosen alternative. An allocation is a pair given by the chosen alternative and the set of its users. Agents have gregarious preferences over allocations: given an allocation, they prefer that the set of users becomes larger. We require that the final allocation be efficient and stable (no agent can be forced to be a user and no agent who wants to be a user can be excluded). We propose a two-stage sequential mechanism whose unique subgame perfect equilibrium outcome is an efficient and stable allocation which also satisfies a maximal participation property.

Long-term outcome after cognitive and behavioral regression in nonlesional epilepsy with continuous spike-waves during slow-wave sleep.

PURPOSE: To present the long-term follow-up of 10 adolescents and young adults with documented cognitive and behavioral regression as children due to nonlesional focal, mainly frontal, epilepsy with continuous spike-waves during slow wave sleep (CSWS). METHODS: Past medical and electroencephalography (EEG) data were reviewed and neuropsychological tests exploring main cognitive functions were administered. KEY FINDINGS: After a mean duration of follow-up of 15.6 years (range, 8-23 years), none of the 10 patients had recovered fully, but four regained borderline to normal intelligence and were almost independent. Patients with prolonged global intellectual regression had the worst outcome, whereas those with more specific and short-lived deficits recovered best. The marked behavioral disorders resolved in all but one patient. Executive functions were neither severely nor homogenously affected. Three patients with a frontal syndrome during the active phase (AP) disclosed only mild residual executive and social cognition deficits. The main cognitive gains occurred shortly after the AP, but qualitative improvements continued to occur. Long-term outcome correlated best with duration of CSWS. SIGNIFICANCE: Our findings emphasize that cognitive recovery after cessation of CSWS depends on the severity and duration of the initial regression. None of our patients had major executive and social cognition deficits with preserved intelligence, as reported in adults with early destructive lesions of the frontal lobes. Early recognition of epilepsy with CSWS and rapid introduction of effective therapy are crucial for a best possible outcome.

Perceived behavioral changes in early multiple sclerosis.

Acquired behavioral changes have essentially been described in advanced multiple sclerosis (MS). The present study was designed to determine whether behavioral modifications specifically related to the MS pathological process could be identified in the initial phase of the disease, as compared to control patients with chronic, relapsing and progressive inflammatory disorders not involving the central nervous system (CNS). Eighty-eight early MS patients (Expanded Disability Status Scale score <or= 2.5) and 48 controls were tested. Perceived changes by informants in behavioral control, goal-directed behavior, decision making, emotional expression, insight and interpersonal relationships were assessed using the Iowa Scale of Personality Change (ISPC). Executive behavioral disturbances were screened using the Dysexecutive Questionnaire (DEX). The mean change between the premorbid and postmorbid ISPC ratings was similar in the MS [12.2 (SD 15.6)] and in the control [11.5 (SD 15.1)] group. The perceived behavioral changes (PBCs) most frequently reported in both groups were lack of stamina, lability/moodiness, anxiety, vulnerability to stress and irritability. Pathological scores in the DEX were also similar in both groups. Correlations between PBCs and DEX scores were different in MS and control groups. MS patients with cognitive impairment had a marginally higher number of PBCs than control patients (p=0.056) and a significantly higher DEXp score (p=0.04). These results suggest that (1) PBCs occurring in early MS patients were not different from those induced by comparable chronic non-CNS disorders, (2) qualitative differences in the relationship between behavioral symptoms and executive-behavioral changes may exist between MS and control groups, and (3) behavioral symptoms seem associated with cognitive deficits in MS. We further plan to assess these observations longitudinally.

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.

Productivity, Preferences and UIP deviations in an Open Economy Business Cycle Model

We show that a flex-price two-sector open economy DSGE model can explain the poor degree of international risk sharing and exchange rate disconnect. We use a suite of model evaluation measures and examine the role of (i) traded and non-traded sectors; (ii) financial market incompleteness; (iii) preference shocks; (iv) deviations from UIP condition for the exchange rates; and (v) creditor status in net foreign assets. We find that there is a good case for both traded and non-traded productivity shocks as well as UIP deviations in explaining the puzzles.

Behavioral and psychological symptoms and cognitive decline in patients with amnestic MCI and mild AD: a two-year follow-up study.

BACKGROUND: Mild cognitive impairment (MCI) has been defined as a transitional state between normal aging and dementia. In many cases, MCI represents an early stage of developing cognitive impairment. Patients diagnosed with MCI do not meet the criteria for dementia as their general intellect and everyday activities are preserved, although minor changes in instrumental activities of daily living (ADL) may occur. However, they may exhibit significant behavioral and psychological signs and symptoms (BPS), also frequently observed in patients with Alzheimer's disease (AD). Hence, we wondered to what extent specific BPS are associated with cognitive decline in participants with MCI or AD. METHODS: Our sample consisted of 164 participants, including 46 patients with amnestic (single or multi-domain) MCI and 54 patients with AD, as well as 64 control participants without cognitive disorders. Global cognitive performance, BPS, and ADL were assessed using validated clinical methods at baseline and at two-year follow-up. RESULTS: The BPS variability over the follow-up period was more pronounced in the MCI group than in patients with AD: some BPS improve, others occur newly or worsen, while others still remain unchanged. Moreover, specific changes in BPS were associated with a rapid deterioration of the global cognitive level in MCI patients. In particular, an increase of euphoria, eating disorders, and aberrant motor behavior, as well as worsened sleep quality, predicted a decline in cognitive functioning. CONCLUSIONS: Our findings confirm a higher variability of BPS over time in the MCI group than in AD patients. Moreover, our results provide evidence of associations between specific BPS and cognitive decline in the MCI group that might suggest a risk of conversion of individuals with amnestic MCI to AD.

A behavioral study of alpha-1b adrenergic receptor knockout mice: increased reaction to novelty and selectively reduced learning capacities.

Knockout mice lacking the alpha-1b adrenergic receptor were tested in behavioral experiments. Reaction to novelty was first assessed in a simple test in which the time taken by the knockout mice and their littermate controls to enter a second compartment was compared. Then the mice were tested in an open field to which unknown objects were subsequently added. Special novelty was introduced by moving one of the familiar objects to another location in the open field. Spatial behavior and memory were further studied in a homing board test, and in the water maze. The alpha-1b knockout mice showed an enhanced reactivity to new situations. They were faster to enter the new environment, covered longer paths in the open field, and spent more time exploring the new objects. They reacted like controls to modification inducing spatial novelty. In the homing board test, both the knockout mice and the control mice seemed to use a combination of distant visual and proximal olfactory cues, showing place preference only if the two types of cues were redundant. In the water maze the alpha-1b knockout mice were unable to learn the task, which was confirmed in a probe trial without platform. They were perfectly able, however, to escape in a visible platform procedure. These results confirm previous findings showing that the noradrenergic pathway is important for the modulation of behaviors such as reaction to novelty and exploration, and suggest that this is mediated, at least partly, through the alpha-1b adrenergic receptors. The lack of alpha-1b adrenergic receptors in spatial orientation does not seem important in cue-rich tasks but may interfere with orientation in situations providing distant cues only.

Notes on Agents’ Behavioral Rules Under Adaptive Learning and Studies of Monetary Policy

These notes try to clarify some discussions on the formulation of individual intertemporal behavior under adaptive learning in representative agent models. First, we discuss two suggested approaches and related issues in the context of a simple consumption-saving model. Second, we show that the analysis of learning in the NewKeynesian monetary policy model based on “Euler equations” provides a consistent and valid approach.

Two Studies on the Interplay between Social Preferences and Individual Biological Features

Biological features and social preferences have been studied separately as factors influencing human strategic behaviour. We run two studies in order to explore the interplay between these two sets of factors. In the first study, we investigate to what extent social preferences may have some biological underpinnings. We use simple one-shot distribution experiments to attribute subjects one out of four types of social preferences: Self-interested (SI), Competitive (C), Inequality averse (IA) and Efficiency-seeking (ES). We then investigate whether these four groups display differences in their levels of facial Fluctuating Asymmetry (FA) and in proxies for exposure to testosterone during phoetal development and puberty. We observe that development-related biological features and social preferences are relatively independent. In the second study, we compare the relative weight of these two set of factors by studying how they affect subjects’ behaviour in the Ultimatum Game (UG). We find differences in offers made and rejection rates across the four social preference groups. The effect of social preferences is stronger than the effect of biological features even though the latter is significant. We also report a novel link between facial masculinity (a proxy for exposure to testosterone during puberty) and rejection rates in the UG. Our results suggest that biological features influence behaviour both directly and through their relation with the type of social preferences that individuals hold.

On Cobb-Douglas Preferences in Bilateral Oligopoly

Bilateral oligopoly is a simple model of exchange in which a finite set of sellers seek to exchange the goods they are endowed with for money with a finite set of buyers, and no price-taking assumptions are imposed. If trade takes place via a strategic market game bilateral oligopoly can be thought of as two linked proportional-sharing contests: in one the sellers share the aggregate bid from the buyers in proportion to their supply and in the other the buyers share the aggregate supply in proportion to their bids. The analysis can be separated into two ‘partial games’. First, fix the aggregate bid at B; in the first partial game the sellers contest this fixed prize in proportion to their supply and the aggregate supply in the equilibrium of this game is X˜ (B). Next, fix the aggregate supply at X; in the second partial game the buyers contest this fixed prize in proportion to their bids and the aggregate bid in the equilibrium of this game is ˜B (X). The analysis of these two partial games takes into account competition within each side of the market. Equilibrium in bilateral oligopoly must take into account competition between sellers and buyers and requires, for example, ˜B (X˜ (B)) = B. When all traders have Cobb-Douglas preferences ˜ X(B) does not depend on B and ˜B (X) does not depend on X: whilst there is competition within each side of the market there is no strategic interdependence between the sides of the market. The Cobb-Douglas assumption provides a tractable framework in which to explore the features of fully strategic trade but it misses perhaps the most interesting feature of bilateral oligopoly, the implications of which are investigated.

Effects of stress on economic decision-making: Evidence from laboratory experiments

The ways in which preferences respond to the varying stress of economic environments is a key question for behavioral economics and public policy. We conducted a laboratory experiment to investigate the effects of stress on financial decision making among individuals aged 50 and older. Using the cold pressor task as a physiological stressor, and a series of intelligence tests as cognitive stressors, we find that stress increases subjective discounting rates, has no effect on the degree of risk-aversion, and substantially lowers the effort individuals make to learn about financial decisions.

A Case of Framing Effects: The Elicitation of Time Preferences.

We compare three methods for the elicitation of time preferences in an experimental setting: the Becker-DeGroot-Marschak procedure (BDM); the second price auction; and the multiple price list format. The first two methods have been used rarely to elicit time preferences. All methods used are perfectly equivalent from a decision theoretic point of view, and they should induce the same ‘truthful’ revelation i dominant strategies. In spite of this, we find that framing does matter: the money discount rates elicited with the multiple price list tend to be higher than those elicited with the other two methods. In addition, our results shed some light on attitudes towards time, and they permit a broad classification of subjects depending on how the size of the elicited values varies with the time horizon.