 Mathias Hoffmann, Has consumption risk sharing increased in Asia (and elsewhere)?, Seoul Journal of Economics, Vol. 24 (4), 2011. (Journal Article)
 
What impact has financial globalization had on risk sharing? In theory, financial globalization
should improve international consumption risk sharing. While the answer to this question is of
utmost policymaking concern, results in the empirical literature are inconclusive. The paper
surveys the extant literature and tries to identify which factors influence the answer: i)
consumption risk sharing seems to have increased among industrialized countries but much less in
the emerging world. ii) The increase in risk sharing is generally found to be stronger in studies that
focus on the trends rather than purely cyclical variation in the data. iii) globalization has not only
affected consumption responses to output shocks but also the structure of these shocks themselves.
This, in turn, has affected the measurement of risk sharing. The paper examines the relevance of
these points on a sample of East Asian Economies. My results indicate that risk sharing in East Asia
has started to increase once the region had recovered from the Asian crisis. |
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Reto Föllmi, Josef Zweimüller, Mass Consumption, Exclusion, and Unemployment, In: Umverteilung und soziale Gerechtigkeit, Mohr Siebeck, Tübingen, p. 165 - 192, 2011. (Book Chapter)
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Ernst Fehr, Antonio Rangel, Neuroeconomic foundations of economic choice – recent advances, Journal of Economic Perspectives, Vol. 25 (4), 2011. (Journal Article)
Neuroeconomics combines methods and theories from neuroscience psychology, economics, and computer science in an effort to produce detailed computational and neurobiological accounts of the decision-making process that can serve as a common foundation for understanding human behavior across the natural and social sciences. Because neuroeconomics is a young discipline, a sufficiently sound structural model of how the brain makes choices is not yet available. However, the contours of such a computational model are beginning to arise; and, given the rapid progress, there is reason to be hopeful that the field will eventually put together a satisfactory structural model. This paper has two goals: First, we provide an overview of what has been learned about how the brain makes choices in two types of situations: simple choices among small numbers of familiar stimuli (like choosing between an apple or an orange), and more complex choices involving tradeoffs between immediate and future consequences (like eating a healthy apple or a less-healthy chocolate cake). Second, we show that, even at this early stage, insights with important implications for economics have already been gained. |
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Bruno Frey, Peace, war, and happiness: Bruder Klaus as wellbeing facilitator, International Journal of Wellbeing, Vol. 1 (2), 2011. (Journal Article)
Little is known in the scholarly literature about the effect of war and peace on happiness; but they have a large number of direct and indirect effects on happiness, difficult or impossible to capture due mainly to issues of causality and attribution. The paper concentrates on three fundamental claims regarding the effect of war and peace on happiness: ‘War brings happiness’; ‘People adjust to wars’; and ‘The happiness of the dead is irrelevant’. An attempt is made to discuss different solutions to deal with these claims but it is made clear that each one has grave disadvantages. Bruder Klaus, whose full name was Niklaus von Flüeh, is the patron saint of Switzerland. This paper describes Bruder Klaus as a creator of peace and, based on the claims mentioned above, as a felicitator or wellbeing facilitator. |
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Thomas Epper, Helga Fehr-Duda, Adrian Bruhin, Viewing the future through a warped lens: Why uncertainty generates hyperbolic discounting, Journal of Risk and Uncertainty, Vol. 43 (3), 2011. (Journal Article)
A large body of experimental research has demonstrated that, on
average, people violate the axioms of expected utility theory as well as of
discounted utility theory. In particular, aggregate behavior is best characterized
by probability distortions and hyperbolic discounting. But is it the
same people who are prone to these behaviors? Based on an experiment
with salient monetary incentives we demonstrate that there is a strong and
significant relationship between greater departures from linear probability
weighting and the degree of decreasing discount rates at the level of individual
behavior.We argue that this relationship can be rationalized by the uncertainty
inherent in any future event, linking discounting behavior directly to risk
preferences. Consequently, decreasing discount rates may be generated by
people’s proneness to probability distortions. |
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Bruno Frey, Margit Osterloh, Zeitoum Hossam, Ökonomik als Denkweise: aussermarktliche Ökonomik, In: Religion- Wirtschaft - Politik, Pano, Zürich, p. 351 - 367, 2011. (Book Chapter)
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S Meseck, Liquiditätsregulierung nach Basel III: Eine Inhaltsanalyse der eingegangenen Stellungnahmen zum Entwurf der regulatorischen Anforderungen an die Liquiditätshaltung bei Grossbanken im Rahmen von Basel III, University of Zurich, Faculty of Economics, Business Administration and Information Technology, 2011. (Dissertation)
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Reto Föllmi, Josef Zweimüller, Exclusive goods and formal-sector employment, American Economic Journal: Macroeconomics, Vol. 3 (1), 2011. (Journal Article)
We explore how the underemployment problem of less-developed economies is related to income inequality. Consumers have nonhomothetic preferences over differentiated products of formal-sector goods and thus inequality affects the composition of aggregate demand via the price-setting behavior of firms. We find that high inequality divides the formal sector into mass producers and exclusive producers (which serve only the rich); high inequality generates an equilibrium where many workers are crowded into the informal economy; and an increase in subsistence productivity raises the unskilled workers' wages and boosts employment due to the higher purchasing power of poorer households. |
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Eva-Maria Aulich, Zusammenhang zwischen Überkonfidenz und Beförderung, Cuvillier Verlag, Göttingen, 2011. (Book/Research Monograph)
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Piia Astikainen, Gabor Stefanics, Miriam Nokia, Arto Lipponen, Fengyu Cong, Markku Penttonen, Timo Ruusuvirta, Memory-based mismatch response to frequency changes in rats, PLoS ONE, Vol. 6 (9), 2011. (Journal Article)
Any occasional changes in the acoustic environment are of potential importance for survival. In humans, the preattentive detection of such changes generates the mismatch negativity (MMN) component of event-related brain potentials. MMN is elicited to rare changes ('deviants') in a series of otherwise regularly repeating stimuli ('standards'). Deviant stimuli are detected on the basis of a neural comparison process between the input from the current stimulus and the sensory memory trace of the standard stimuli. It is, however, unclear to what extent animals show a similar comparison process in response to auditory changes. To resolve this issue, epidural potentials were recorded above the primary auditory cortex of urethane-anesthetized rats. In an oddball condition, tone frequency was used to differentiate deviants interspersed randomly among a standard tone. Mismatch responses were observed at 60-100 ms after stimulus onset for frequency increases of 5% and 12.5% but not for similarly descending deviants. The response diminished when the silent inter-stimulus interval was increased from 375 ms to 600 ms for +5% deviants and from 600 ms to 1000 ms for +12.5% deviants. In comparison to the oddball condition the response also diminished in a control condition in which no repetitive standards were presented (equiprobable condition). These findings suggest that the rat mismatch response is similar to the human MMN and indicate that anesthetized rats provide a valuable model for studies of central auditory processing. |
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N Miskovic, Mission, Power and Violence: Serbia’s National Turn, In: Conflicting Loyalties in the Balkans: The Great Powers, the Ottoman Empire and Nation-building, I. B. Tauris, London, p. 205 - 224, 2011. (Book Chapter)
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Bruno Frey, Subjective well-being, politics and political economy, Schweizerische Zeitschrift für Volkswirtschaft und Statistik = Swiss journal of economics and statistics, Vol. 147 (4), 2011. (Journal Article)
Happiness research has significantly extended our knowledge about the factors determining individual well-being. Several prominent scholars concluded that governments should engage in maximizing happiness. This approach is based on a technocratic notion that politicians are omniscient benevolent dictators.In contrast, the constitutional approach considers individuals as citizens who, behind the veil of ignorance, choose political rules producing the best possible outcome. Citizens are aware of the Manipulation Principle stating that government tends to distort official happiness indicators in its favour. Citizens therefore demand extensive democratic participation rights allowing them to pursue the kind of happiness they desire. |
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J R Chumbley, G Flandin, D R Bach, Jean Daunizeau, Ernst Fehr, R J Dolan, K J Friston, Learning and generalization under ambiguity: An fMRI Study, PLoS Computational Biology, Vol. 8 (1), 2011. (Journal Article)
Adaptive behavior often exploits generalizations from past experience by applying them judiciously in new situations. This requires a means of quantifying the relative importance of prior experience and current information, so they can be balanced optimally. In this study, we ask whether the brain generalizes in an optimal way. Specifically, we used Bayesian learning theory and fMRI to test whether neuronal responses reflect context-sensitive changes in ambiguity or uncertainty about experience-dependent beliefs. We found that the hippocampus expresses clear ambiguity-dependent responses that are associated with an augmented rate of learning. These findings suggest candidate neuronal systems that may be involved in aberrations of generalization, such as over-confidence. |
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Urs Schweri, Three essays in financial economics, University of Zurich, Faculty of Economics, Business Administration and Information Technology, 2011. (Dissertation)
In the modern world of finance, understanding the drivers of asset value is crucial. This thesis is divided into three research articles that covers various aspects of this issue. The first paper estimates the pricing kernel from equity data. The pricing kernel is an essential tool to price a given random stream of payment, for example, a stock. While standard economic theory suggests a decreasing pricing kernel; empirical literature on the other hand often finds a U-shaped one. The main contribution of this paper to the existing literature is the systematic testing of the increasing parts for statistical significance and the finding that the increases are not statistically significant. Even if not significant, the U-shaped pricing kernels are found in various datasets and in different time periods, thus indicating the existence of increasing parts in the kernel. It is also found that the U-shape can be obtained by estimating the kernel with various functional forms, thereby ruling out the role of the specificity of the pricing kernel functional form. The second paper develops a model to analyze the impact of financial constraints on the value and investment behavior of a firm. The model explains many puzzling effects found in empirical literature such as the high-growth, high-risk nature of small firms, pro-cyclical investment behavior, the leverage effect and the higher average returns of value stocks. The last paper uses simulations to show that in the long run, a strategy based on the fundamental value of an asset (more specifically, the expected discounted value of dividend payments) is better than many other potentially irrational investment strategies and that this is particularly true when firms can default and dividends are nonstationary. This finding extends the existing literature on evolutionary finance.
In modernen Finanzmärkten ist es wichtig zu verstehen, wie der Wert eines Wertpapiers bestimmt wird. Diese Dissertation behandelt dieses Thema in drei Teilen. Der erste Teil schätzt den Pricing Kernel mit Hilfe von Aktiendaten. Mit dem Pricing Kernel kann der Wert eines zufälligen Zahlungsstroms, z. B. einer Aktie, bestimmt werden. Gemäss den üblichen ökonomischen An- nahmen muss der Kernel fallend sein; empirische Schätzungen finden jedoch häufig U-förmige Teile im Pricing Kernel. Im Wesentlichen zeigt dieser Teil, dass die steigenden Teile im Kernel nicht statistisch signifikant sind. Jedoch kann die U-Form in verschiedenen Datensätzen und Zeitperioden gefunden werden. Dies deutet darauf hin, dass der Kernel trotzdem steigende Teile enthalten kann. Gestützt wird dies durch die Tatsache, dass die U-Form bestehen bleibt, auch wenn unterschiedliche funktionale Formen für den Kernel verwendet werden. Der zweite Teil entwickelt und analysiert, was mit dem Wert und den Investitionen einer Firma geschieht, wenn diese keinen Zugriff auf externe Finanzierung hat. Es stellt sich heraus, dass verschiedene Puzzles aus der empirischen Literatur, wie das hohe Wachstum und Risiko kleiner Firmen, das pro-zyklische Investitionsverhalten, der Leverage Effekt oder die höhere Durchschnittsrendite von Value Aktien, dadurch erklärt werden können. Der letzte Teil simuliert Investitionsstrategien. Dabei wird aufgezeigt, dass sich eine Strategie, welche auf Basis der Fundamentalwerte der Firmen (der Summe der erwarteten, abdiskontierten Dividendenzahlungen) investiert, eine bessere langfristige Performance erzielt als andere potentiell irrationale Strategien. Dies gilt im Besonderen auch dann, wenn die Dividenden nicht stationär sind und Firmen Bankrott gehen können. Letzteres trägt zur Erweiterung der bestehenden Literatur in Evolutionary Finance bei. |
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I M Kaufmann, The neuroeconomic view on trust: Ethical, practical and theoretical implications in the realm of organizations, Patzer Verlag, Berlin-Hannover, 2011. (Book/Research Monograph)
Almost all social interations between people, but also within and between social groups rely on trust. Thus trust is one of the most relevant social phenomena, influencing our thinking, our feelings, our decisions and the way we act. The decision to trust typically requires the willingness of one party to rely on the actions of another party. Examples of trust relationships within organizations start at the individual level, e.g. people working together in a team, and develop into intra-organizational constellations, like teams sharing ideas or differnet departments working together on joint projects. But also the organizations itself is judged according to its trustworthiness by its internal and external stakeholders. Therefore, managing trust relationships is of key importance to organizational live. Challenges of managing these trust relationships are manifold and become the worst if negative experiences lead to a breakdown of trust. Organizations are therefore dependent on guidance on how to build, maintain, and rebuild trust across all organzational levels. The present book benchmarks to what extent a neuroeconomic view of trust can advance existing theoretical conceptualizations and can be of managerial help for organizational practice. It thus illustrates the practical help for organizational practice. It thus illustrates the practical relevance of trust an pictures the existing theoretival relevance of trust and pictures the existing theoretical landscape of already existing approaches to trust. Unlike other theoretical concepts, neuroeconomics starts to explain trust at the level of an individual's brain. This is possible due to its interdisciplinary access using neuroscientific methods, psychological theories, and economic models. As a result, new insights of understanding trust are at hand and worth to be discussed for its theoretical and practical insights. |
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Martin Grossmann, Markus Lang, Helmut Max Dietl, Transitional dynamics in a Tullock contest with a general cost function, B.E.Journal of Theoretical Economics, Vol. 11 (1), 2011. (Journal Article)
This paper constructs and analyzes open-loop equilibria in an infinitely repeated Tullock contest in which two contestants contribute efforts to accumulate individual asset stocks over time. To investigate the transitional dynamics of the contest in the case of a general cost function, we linearize the model around the steady state. Our analysis shows that optimal asset stocks and their speed of convergence to the steady state crucially depend on the elasticity of marginal effort costs, the discount factor and the depreciation rate. In the case of a cost function with a constant elasticity of marginal costs, a lower discount factor, a higher depreciation rate and a lower elasticity imply a higher speed of convergence to the steady state. We further analyze the effects of second prizes in the contest. A higher prize spread increases individual and aggregate asset stocks, but does not alter the balance of the contest in the long run. During the transition, a higher prize spread increases asset stocks, produces a more balanced contest in each period and increases the speed of convergence to the steady state. |
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Reto Eberle, Neues Rechnungslegungsrecht: Übersicht und kritische Würdigung, In: Treuhand und Revision: Jahrbuch 2010, WEKA, Zürich, p. 37 - 56, 2011. (Book Chapter)
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Reto Eberle, J Frank, Daniela Schmitz, E Teitler-Feinberg, M Ziegerer, D Zöbeli, Swiss GAAP FER 21: Rechnungslegung für gemeinnützige, soziale Nonprofit-Organisationen, SKV, Zürich, 2011. (Book/Research Monograph)
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F Ruud, P Friebe, Daniela Schmitz, S Isufi, International Professional Practices Framework: Overview of the current guidance of the Institute of Internal Auditors, In: Gobal Management Challenges of Internal Auditors: ECIIA Yearbook of Internal Audit 2010/11, Erich Schmidt, Berlin, p. 17 - 27, 2011. (Book Chapter)
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Andrea Antal, Rafael Polania, Katharina Saller, Carmen Morawetz, Carsten Schmidt-Samoa, Jürgen Baudewig, Walter Paulus, Peter Dechent, Differential activation of the middle-temporal complex to visual stimulation in migraineurs, Cephalalgia, Vol. 31 (3), 2011. (Journal Article)
OBJECTIVE: Differences between people with and without migraine on various measures of visual perception have been attributed to abnormal cortical processing due to the disease. The aim of the present study was to explore the dynamics of the basic interictal state with regard to the extrastriate, motion-responsive middle temporal area (MT-complex) with functional magnetic resonance imaging (fMRI) at 3 tesla using coherent/incoherent moving dot stimuli.
METHOD: Twenty-four migraine patients (12 with aura [MwA], 12 without aura [MwoA]) and 12 healthy subjects participated in the study. The individual cortical folding pattern was accounted for by using a cortical matching approach.
RESULTS: In the inferior-posterior portion of the MT-complex, most likely representing MT, control subjects showed stronger bilateral activation compared to MwA and MwoA patients. Compared with healthy controls MwoA and MwA patients showed significantly stronger activation mainly at the left side in response to visual stimulation in the superior-anterior portion of the MT-complex, representing the medial-superior temporal area (MST).
CONCLUSION: Our findings strengthen the hypothesis that hyperresponsiveness of the visual cortex in migraine goes beyond early visual areas, even in the interictal period. |
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