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.

PFO closure vs. medical therapy in cryptogenic stroke or transient ischemic attack: A systematic review and meta-analysis.

BACKGROUND/OBJECTIVES: This study aims to assess whether patent foramen ovale (PFO) closure is superior to medical therapy in preventing recurrence of cryptogenic ischemic stroke or transient ischemic attack (TIA). METHODS: We searched PubMed for randomized trials which compared PFO closure with medical therapy in cryptogenic stroke/TIA using the items: "stroke or cerebrovascular accident or TIA" and "patent foramen ovale or paradoxical embolism" and "trial or study". RESULTS: Among 650 potentially eligible articles, 3 were included including 2303 patients. There was no statistically significant difference between PFO-closure and medical therapy in ischemic stroke recurrence (1.91% vs. 2.94% respectively, OR: 0.64, 95%CI: 0.37-1.10), TIA (2.08% vs. 2.42% respectively, OR: 0.87, 95%CI: 0.50-1.51) and death (0.60% vs. 0.86% respectively, OR: 0.71, 95%CI: 0.28-1.82). In subgroup analysis, there was significant reduction of ischemic strokes in the AMPLATZER PFO Occluder arm vs. medical therapy (1.4% vs. 3.04% respectively, OR: 0.46, 95%CI: 0.21-0.98, relative-risk-reduction: 53.2%, absolute-risk-reduction: 1.6%, number-needed-to-treat: 61.8) but not in the STARFlex device (2.7% vs. 2.8% with medical therapy, OR: 0.93, 95%CI: 0.45-2.11). Compared to medical therapy, the number of patients with new-onset atrial fibrillation (AF) was similar in the AMPLATZER PFO Occluder arm (0.72% vs. 1.28% respectively, OR: 1.81, 95%CI: 0.60-5.42) but higher in the STARFlex device (0.64% vs. 5.14% respectively, OR: 8.30, 95%CI: 2.47-27.84). CONCLUSIONS: This meta-analysis does not support PFO closure for secondary prevention with unselected devices in cryptogenic stroke/TIA. In subgroup analysis, selected closure devices may be superior to medical therapy without increasing the risk of new-onset AF, however. This observation should be confirmed in further trials using inclusion criteria for patients with high likelihood of PFO-related stroke recurrence.

Training medical students to conduct motivational interviewing: a randomized controlled trial.

OBJECTIVE: To examine the effectiveness of motivational interviewing (MI) training among medical students. METHODS: All students (n=131) (year 5) at Lausanne Medical School, Switzerland were randomized into an experimental or a control group. After a training in basic communication skills (control condition), an 8-h MI training was completed by 84.8% students in the exprimental group. One week later, students in both groups were invited to meet with two standardized patients. MI skills were coded by blinded research assistants using the Motivational Interviewing Treatment Integrity 3.0. RESULTS: Superior MI performance was shown for trained versus control students, as demonstrated by higher scores for "Empathy" [p<0.001] and "MI Spirit" [p<0.001]. Scores were similar between groups for "Direction", indicating that students in both groups invited the patient to talk about behavior change. Behavior counts assessment demonstrated better performance in MI in trained versus untrained students regarding occurences of MI-adherent behavior [p<0.001], MI non-adherent behavior [p<0.001], Closed questions [p<0.001], Open questions [p=0.001], simple reflections [p=0.03], and Complex reflections [p<0.001]. Occurrences were similar between groups regarding "Giving information". CONCLUSION: An 8-h training workshop was associated with improved MI performance. PRACTICE IMPLICATIONS: These findings lend support for the implementation of MI training in medical schools.

I have faith in my thing, you know what I mean? Mixed method elements on individual investments on religious markets.

In contemporary society, religious signification and secular systems mix and influence each other. Holistic conceptions of a world in which man is integrated harmoniously with nature meet representations of a world run by an immanent God. On the market of the various systems, the individual goes from one system to another, following his immediate needs and expectations without necessarily leaving any marks in a meaningful long term system. This article presents the first results of an ongoing research in Switzerland on contemporary religion focusing on (new) paths of socialization of modern that individuals and the various (non-) belief systems that they simultaneously develop

Reforms of the pre-graduate curriculum for medical students: the Bologna process and beyond.

For several years, all five medical faculties of Switzerland have embarked on a reform of their training curricula for two reasons: first, according to a new federal act issued in 2006 by the administration of the confederation, faculties needed to meet international standards in terms of content and pedagogic approaches; second, all Swiss universities and thus all medical faculties had to adapt the structure of their curriculum to the frame and principles which govern the Bologna process. This process is the result of the Bologna Declaration of June 1999 which proposes and requires a series of reforms to make European Higher Education more compatible and comparable, more competitive and more attractive for Europeans students. The present paper reviews some of the results achieved in the field, focusing on several issues such as the shortage of physicians and primary care practitioners, the importance of public health, community medicine and medical humanities, and the implementation of new training approaches including e-learning and simulation. In the future, faculties should work on several specific challenges such as: students' mobility, the improvement of students' autonomy and critical thinking as well as their generic and specific skills and finally a reflection on how to improve the attractiveness of the academic career, for physicians of both sexes.

The Swiss Systemic lupus erythematosus Cohort Study (SSCS) - cross-sectional analysis of clinical characteristics and treatments across different medical disciplines in Switzerland.

OBJECTIVES: To describe disease characteristics and treatment modalities in a multidisciplinary cohort of systemic lupus erythematosus (SLE) patients in Switzerland. METHODS: Cross-sectional analysis of 255 patients included in the Swiss SLE Cohort and coming from centres specialised in Clinical Immunology, Internal Medicine, Nephrology and Rheumatology. Clinical data were collected with a standardised form. Disease activity was assessed using the Safety of Estrogens in Lupus Erythematosus National Assessment-SLE Disease Activity Index (SELENA-SLEDAI), an integer physician's global assessment score (PGA) ranging from 0 (inactive) to 3 (very active disease) and the erythrocyte sedimentation rate (ESR). The relationship between SLE treatment and activity was assessed by propensity score methods using a mixed-effect logistic regression with a random effect on the contributing centre. RESULTS: Of the 255 patients, 82% were women and 82% were of European ancestry. The mean age at enrolment was 44.8 years and the median SLE duration was 5.2 years. Patients from Rheumatology had a significantly later disease onset. Renal disease was reported in 44% of patients. PGA showed active disease in 49% of patients, median SLEDAI was 4 and median ESR was 14 millimetre/first hour. Prescription rates of anti-malarial drugs ranged from 3% by nephrologists to 76% by rheumatologists. Patients regularly using anti-malarial drugs had significantly lower SELENA-SLEDAI scores and ESR values. CONCLUSION: In our cohort, patients in Rheumatology had a significantly later SLE onset than those in Nephrology. Anti-malarial drugs were mostly prescribed by rheumatologists and internists and less frequently by nephrologists, and appeared to be associated with less active SLE.

Exploring the use of the Swiss medical tariffication codes (TARMED) in the establishment of the frequency of radiodiagnostic examinations.

In population surveys of the exposure to medical X-rays both the frequency of examinations and the effective dose per examination are required. The use of the Swiss medical tariffication system (TARMED) for establishing the frequency of X-ray medical examinations was explored. The method was tested for radiography examinations performed in 2008 at the Lausanne University Hospital. The annual numbers of radiographies determined from the "TARMED" database are in good agreement with the figures extracted from the local RIS (Radiology Information System). The "TARMED" is a reliable and fast method for establishing the frequency of radiography examination, if we respect the context in which the "TARMED" code is used. In addition, this billing context provides most valuable information on the average number of radiographs per examination as well as the age and sex distributions. Radiographies represent the major part of X-ray examinations and are performed by about 4,000 practices and hospitals in Switzerland. Therefore this method has the potential to drastically simplify the organisation of nationwide surveys. There are still some difficulties to overcome if the method is to be used to assess the frequency of computed tomography or fluoroscopy examinations; procedures that deliver most of the radiation dose to the population. This is due to the poor specificity of "TARMED" codes concerning these modalities. However, the use of CT and fluoroscopy installations is easier to monitor using conventional survey methods since there are fewer centres. Ways to overcome the "TARMED" limitations for these two modalities are still being explored.

Exposure of the Swiss population by medical x-rays: 2008 review.

Nationwide surveys on radiation dose to the population from medical radiology are recommended in order to follow the trends in population exposure and ensure radiation protection. The last survey in Switzerland was conducted in 1998, and the annual effective dose from medical radiology was estimated to be 1 mSv y(-1) per capita. The purpose of this work was to follow the trends in diagnostic radiology between 1998 and 2008 in Switzerland and determine the contribution of different modalities and types of examinations to the collective effective dose from medical x-rays. For this reason, an online database (www.raddose.ch) was developed. All healthcare providers who hold a license to run an x-ray unit in the country were invited to participate in the survey. More than 225 examinations, covering eight radiological modalities, were included in the survey. The average effective dose for each examination was reassessed. Data from about 3,500 users were collected (42% response rate). The survey showed that the annual effective dose was 1.2 mSv/capita in 2008. The most frequent examinations are conventional and dental radiographies (88%). The contribution of computed tomography was only 6% in terms of examination frequency but 68% in terms of effective dose. The comparison with other countries showed that the effective dose per capita in Switzerland was in the same range as in other countries with similar healthcare systems, although the annual number of examinations performed in Switzerland was higher.