Shareholders assume risk by investing. Sollars and Tuluca (2018) argue that while this does not justify a managerial policy of shareholder wealth maximization, it does justify compensating shareholders at the oftencalculated cost of equity—the cost that investors require given the level of risk they assume. Here, I show that this can be unfair if the cost of equity is unfair. I then show how shareholder wealth maximization as a managerial imperative is better justified on other grounds.

A probability forecast scored ex post using a probability scoring rule (e.g. Brier) is analogous to a risky financial security. With only superficial adaptation, the same economic logic by which securities are valued ex ante – in particular, portfolio theory and the capital asset pricing model (CAPM) – applies to the valuation of probability forecasts. Each available forecast of a given event is valued relative to each other and to the “market” (all available forecasts). A forecast is seen (...) to be more valuable the higher its expected score and the lower the covariance of its score with the market aggregate score. Forecasts that score highly in trials when others do poorly are appreciated more than those with equal success in “easy” trials where most forecasts score well. The CAPM defines economically rational (equilibrium) forecast prices at which forecasters can trade shares in each other’s ex post score – or associated monetary payoff – thereby balancing forecast risk against return and ultimately forming optimally hedged portfolios. Hedging this way offers risk averse forecasters an “honest” alternative to the ruse of reporting conservative probability assessments. (shrink)

We investigate whether the display of portfolio performance as coming from one large portfolio or two smaller subportfolios matters to individuals and whether prospect theory can explain this preference. To this end, we run a large survey experiment of 3267 individuals in 5 European countries presenting an identical overall return as coming from one portfolio or two smaller subportfolios to individuals. We also elicited the coefficients of the prospect theory value function through price list lotteries. (...) In losses, following prospect theory and mental accounting predictions, we observe emprically a preference for the display of returns as coming from 2 subportfolios, one displaying a small gain and the other a large loss, over a unique portfolio displaying the aggregated resulting loss. As expected, for an overall gain, individuals favor one portfolio over two subportfolios, one displaying a small loss and the other a larger gain. The shape of the value function does not explain individuals’ preferences. The reference point seems to be the main factor involved in explaining individuals’ choice of two subportfolio presentations of the outcome. (shrink)

The purpose of the study is to investigate the features of the algorithm for forming the stock portfolio of investors using the theory of fuzzy sets, taking into account a priori uncertain input information and market dynamics. The scientific novelty of the article lies in the application of a relatively new fuzzy-multiple apparatus and the theory of fuzzy sets to the formation of the stock portfolio of investors. From a practical point of view, the proposed fuzzy (...) model makes it possible to predict not only the structure and expected return of a portfolio of securities, similarly to the application of the classical portfolio theory, but also to obtain the values of the lower and upper boundaries of the return on securities, which will allow the investor to form a more complete picture of the structure of the portfolio in the future. As a result, it was found that the use of classical statistical approaches for the formation of a stock portfolio of investors will not allow obtaining a reliable and accurate result, since traditional methods do not take into account the uncertainty factors of events in the stock market. To level information asymmetry and eliminate risks of uncertainty, it is advisable to apply the theory of fuzzy logic. (shrink)

This article analyzes investors’ portfolio selection problems in a two-period dynamic model of Knightian uncertainty. We account for the existence of portfolio inertia in this two-period framework. Furthermore, by incorporating investors’ updating behavior, we analyze how observing new information in the first period will affect investors’ behavior. By this analysis, we show that observing new information in the first period will expand portfolio inertia in the second period compared with the case in which observing new information has (...) not been gained in the first period if the degree of Knightian uncertainty is sufficiently large. (shrink)

Traditional portfolio selection models mainly obtain the optimized portfolio ratio by focusing on the prices of financial products. However, investors’ multiple preferences and risk appetites are also significant factors that should be taken into account. In consideration of these two factors simultaneously, we propose a double-hierarchy model in this paper. Specifically, the first hierarchy quantifies investors’ risk appetite based on a historical simulation method and probabilistic preference theory. This hierarchy can be utilized to describe investors’ variable risk (...) appetites and ensure the obtained investment ratios meet investors’ immediate risk requirements. Then, using the cross-efficiency evaluation principle, the optimal investment ratios can be derived by fusing investors’ multiple preferences and risk appetites in the second hierarchy. Lastly, an illustrative example about evaluating the 10 largest capitalized stocks on the Shenzhen Stock Exchange is given to verify the feasibility and effectiveness of our newly proposed model. We make the theoretical contribution to improve the traditional portfolio selection model, especially considering investors’ subjective preferences and risk appetite. Moreover, the proposed model can be practical for assisting investors with their investment strategies in real life. (shrink)

This paper describes the admissible classes of parametric distribution functions of return portfolios and analyzes their consistency with the maximization of the expected utility. In particular, we present a general theory and a unifying framework with the following aims: (1) studying the implications of the classical market restrictions on the portfolio distributions; (2) establishing general rules of ordering, when the uncertain prospect depends by a finite number of parameters; (3) understanding how a dispersion measure has to be used, (...) in order to obtain the investors' optimal portfolios. (shrink)

In this note we provide new results of interest in the portfolio choice problem when the risky opportunities are correlated: for a general vector (X 1, X 2,..., X n ) of risky opportunities we give new conditions for stochastic comparison among different portfolios choices and new necessary and sufficient conditions to characterize the portfolio which gives the maximal expected utility.

A portfolio-resampling procedure invented by Richard and Robert Michaud is a subject of highly controversial discussion and big scientific dispute. It has been evaluated in many empirical studies and Monte Carlo experiments. Apart from the contradictory findings, the Michaud approach still lacks a theoretical foundation. I prove that portfolio resampling has a strong foundation in the classic theory of rational behavior. Every noise trader could do better by applying the Michaud procedure. By contrast, a signal trader who (...) has enough prediction power and risk-management skills should refrain from portfolio resampling. The key note is that in most simulation studies, investors are considered as noise traders. This explains why portfolio resampling performs well in simulation studies, but could be mediocre in real life. (shrink)

We analyze the comparative static effects of changes in the means, the standard deviations and the covariance of asset returns in a standard portfolio selection problem when investors have mean variance preferences. Simple and intuitive characterizations in terms of the elasticity of risk aversion are provided.

This study aimed at investigating the role of electronic portfolios in fostering pre?service teachers? reflective thinking. The research was conducted with pre?service English language teachers enrolled in a practicum course in an undergraduate teacher education programme in Turkey. The data were collected through e?portfolios and interviews. The findings revealed that e?portfolios gave participants a sense of ownership, fostered reflecting thinking, supported collaboration and allowed them to make connections between theory and practice. With the on?going nature of the e?portfolio, (...) participants had the chance of developing and reviewing their portfolio artefacts whenever and wherever they wanted. Therefore, electronic portfolios allowed teacher candidates to reflect more on their own work and thus engage in on?going professional development. (shrink)

Standard models of portfolio investment rely on various statistical measures of dispersion. Such measures favor returns smoothed over all states of the world and penalize abnormally low as well as abnormally high returns. A model of portfolio investment based on the tradeoff between expected return and expected loss considers only abnormally low returns as undesirable. Such a model has a comparative advantage over other existing models in that a first-order stochastically dominant portfolio always has a higher expected (...) return and a lower expected loss. Expected return—expected loss model of portfolio investment can rationalize the equity premium puzzle. Two random variables are not comoving if there is at least one state of the world in which one random variable yields a positive return and the other—a negative return. Such random variables provide hedging benefits from diversification in portfolio investment according to the expected return—expected loss model. A special case of this model, when an investor linearly trade-offs expected returns and expected losses, is also a special case of the prospect theory when a decision-maker has a piece-wise linear value function without any probability weighting. (shrink)

This study examines the extent to which corporate responsibility influences the demand for shares by institutions. The study follows Bushee (Account Rev 73(3):305–333, 1998 ) in categorising institutions as dedicated or transient. The demand for shares is organised according to three factors: a long-term factor, corporate responsibility; a short-term factor, market liquidity; and a time-independent factor, portfolio theory. The rank and importance of the factors for the different types of institutional investor are analysed. For one of two types (...) of dedicated institution, corporate responsibility is as important as portfolio theory in influencing the demand for shares. For all dedicated institutions, corporate responsibility influences the demand for shares more than market liquidity. For two of the three types of transient institution, market liquidity is the most important factor in share selection. For all transient institutions, the least important factor is corporate responsibility. Findings suggest that corporate responsibility positively and significantly influences the demand for shares by dedicated institutions. The discussion considers the extent to which these trends are constitutive of significant shifts in ethicality within the context of institutional investment. Looking at this from within a highly institutionalised Anglo market model, dedicated institutions’ commitment to broader and longer-term concerns could be interpreted as a small but significant step towards a more axiologically informed ethical business practice. Such a form of engagement calls for sensitive attention to a fuller range of features deemed to be relevant to investment decisions, as opposed to more narrow reliance on legislation, codes of practice and fiduciary principles. (shrink)

McEntire (1984) proved that, for a portfolio problem with independent assets, the generalized harmonic mean plays the role of a risk-free threshold. Based upon this property, he developed a criterion for including or excluding assets in an optimal portfolio, and he proved an ordering theorem showing that an optimal portfolio always consists of positive amounts of the assets with the largest mean values. Also, some commonly used utility functions were shown to satisfy the property that the dominance (...) of an asset over another is unaffected by the addition of other assets. In this paper we extend these results to the case where assets are dependent. (shrink)

In “Naming with Necessity”, it is argued that Kripke’s thesis that proper names are rigid designators is best seen as being motivated by an individual-driven picture of modality, which has two parts. First, inherent in proper-name usage is the expectation that names refer to modally robust individuals: individuals that can sustain modal predications like ‘is necessarily human’. Second, these modally robust individuals are the fundamental building blocks on the basis of which possible worlds should be conceived in a modal semantics (...) intended to mirror the conceptual apparatus behind ordinary modal talk. The individual-driven picture is distinct from two views inspired by Kripke, direct reference theory and Millianism. The former covers only the first half of the picture, while the latter explicitly gives up on that half even, opting to remain neutral about what expectation expressions impose on the nature of their referents. (shrink)

The all too common sunk cost effect is apparent when an investor influenced by what has been spent already persists in a venture, committing further resources or foregoing more profitable opportunities, when the economically rational action is to quit. Less common but arguably just as much a sunk cost effect is the mistake of giving up on a failed or failing venture too readily, sometimes out of nothing but pique at what has been lost, or perhaps through the more subtle (...) psychological forces posited by Kahneman, Tversky, Thaler and others within prospect theory and related work on ``mental budgeting''. Two case examples are considered, wherein decision makers dissatisfied with the results of their investments, and having lost money, appear to compound their losses by selling out at prices less than their own estimates of the remaining financial worth of the failed assets. These decisions are evaluated from the perspectives of both behavioral and prescriptive economics, and are found to have possible explanations in both. Their prescriptive rationale assumes a portfolio theory of investment decisions, and is demonstrated within both expected utility (economics) and mean-variance (finance) frameworks. (shrink)

We survey the literature that has explored the implications of decision-making under ambiguity for financial market outcomes, such as portfolio choice and equilibrium asset prices. This ambiguity literature has led to a number of significant advances in our ability to rationalize empirical features of asset returns and portfolio decisions, such as the failure of the two-fund separation theorem in portfolio decisions, the modest exposure to risky securities observed for a majority of investors, the home equity preference in (...) international portfolio diversification, the excess volatility of asset returns, the equity premium and the risk-free rate puzzles, and the occurrence of trading break-downs. (shrink)

The question posed is whether the optimization methods of calculus that are often used in social and scientific analyses offer an appropriate analytical approach to analyze problems that are immersed in systemic complexity and its consequences. This paper refers to the portfolio of such complex problems belonging to social and scientific forces. We refer to such a complex combination by the term ‘socio-scientific’. In the study of socio-scientific complexity, dynamic preferences, intricate decisions, and uncertain behavior, endogenous relations and systemic (...) perturbations abound. The arguments presented in this paper establish that the methodological approach of optimization and steady-state equilibrium turns out to be nicety rather than objectivity in the presence of complexity. Complex situations of the socio-scientific universe cause perturbations in the variables; there explaining complexity formed by the social embedding of variables. Indeed, human individuals, institutions and governments, and society at large are complex interrelated entities. Therefore, complex interrelations caused by social embedding remain submerged in social perturbations. However, interactions arising from social embedding also generate endogenous and complex relations. The contribution of this paper is in the area of endogenous learning in the wellbeing objective criterion function. The interrelationships between the emergent cognitive variables now cause interactive embedding, complexity, and social perturbations. Yet such perturbations are not altogether uncontrollable. They can be and need to be controlled for the purposes of social explanation—hence demanding predictability—even as the complex nature of evolutionary systemic learning proceeds. The controllability problem of extreme perturbations leads us to formalize a mathematical methodology to study controllable perturbations while avoiding extreme forms of perturbations in socio-scientific theory. (shrink)

Business models are developed and managed to create value. While most business model frameworks envision value creation as a uni-directional flow between the focal business and its customers, this article presents a broader view based on a stringent application of stakeholder theory. It provides a stakeholder value creation framework derived from key characteristics of stakeholder theory. This article highlights mutual stakeholder relationships in which stakeholders are both recipients and creators of value in joint value creation processes. Key findings (...) include that the concept and analysis of value creation through business models need to be expanded with regard to different types of value created with and for different stakeholders and the resulting value portfolio, i.e., the different kinds of value exchanged between the company and its stakeholders. This paper details the application of the stakeholder value creation framework and its theoretical propositions for the case of business models for sustainability. The framework aims to support theoretical and empirical analyses of value creation as well as the management and transformation of business models in line with corporate sustainability ambitions and stakeholder expectations. Overall, this paper proposes a shift in perspective from business models as devices of sheer value creation to business models as devices that organize and facilitate stakeholder relationships and corresponding value exchanges. (shrink)

It is evident, in the face of the COVID-19 pandemic that has physicians confronting death and dying at unprecedented levels along with growing data suggesting that physicians who care for dying patients face complex emotional, psychological and behavioural effects, that there is a need for their better understanding and the implementation of supportive measures. Taking into account data positing that effects of caring for dying patients may impact a physician’s concept of personhood, or “what makes you, ‘you’”, we adopt Radha (...) Krishna’s Ring Theory of Personhood (RToP) to scrutinise the experiences of physicians working in intensive care units (ICU) using a fictional scenario that was inspired by real events. The impact of death and dying, its catalysts, internal constituents, external factors, dyssynchrony, and buffers, specific to ICU physicians, were identified and explored. Such a framework allows for ramifications to be considered holistically and facilitates the curation of strategies for conflict resolution. This evaluation of the RToP acknowledges the experience and wide-ranging effects it has on ICU physicians. As such, our findings provide insight into their specific needs and highlight the importance of support on a personal and organisational level. Although further research needs to be conducted, the RToP could serve as the basis for a longitudinal assessment tool supported by the use of portfolios or mentorship due to their provision of personalised, appropriate, specific, timely, accessible and long-term support. (shrink)

This paper presents a new decision theory for modelling choice under risk. The new theory is a two-parameter generalization of expected utility theory. The proposed theory assumes that a decision maker: behaves as if maximizing expected utility; but may experience disappointment when the utility of a lottery’s outcome falls short of the expected utility of the lottery; and may have a preference for gambling. The proposed theory can rationalize the fourfold pattern of risk attitudes; the (...) common ratio effect and the reverse thereof ; the Allais paradox in classical common consequence problems and the reverse Allais paradox—in common consequence problems with an even split of a probability mass; violations of the betweenness axiom; switching behavior in the Samuelson’s example; violations of ordinal, upper and lower cumulative independence ; and preference reversals between valuations and choice. In application to insurance, the theory can rationalize full insurance with an actuarially unfair premium and aversion to probabilistic insurance. In application to optimal portfolio investment, the theory can rationalize the equity premium puzzle. (shrink)

128 female Ss were asked to make 4 judgments about a young woman after reading her "job application portfolio." Five characteristics of the young woman were manipulated orthogonally. Ss were asked to report how each of the 5 manipulated factors had influenced each of their judgments. "Observer Ss," who had access only to very impoverished descriptions of each of the 5 factors, were asked to predict how each of the factors would influence each of the judgments. Results show that (...) S reports about the effects of the factors on the judgments were in general highly inaccurate; observer predictions were extremely similar to S reports; for the single judgment for which Ss showed substantial accuracy, observer predictions were as accurate as S reports. Results indicate that whatever introspective access to cognitive processes may exist, it is not sufficient to produce generally accurate reports about such processes, nor even to produce reports that differ much from those of poorly informed outside observers. (shrink)

Development strategy of using modern portfolio theory focused on the short term. However, macroeconomic uncertainty and geopolitical environment makes their use ineffective. And challenge is to provide a reasonable balance between the short and long term profitability. Another issue, which is to some extent related to the previous observation is the absence in most matrices strategic recommendations for non-standard "behavior" of business units with dynamic analysis. This applies to the use of a relatively new tool matrix approach to (...) development strategies the company and its strategic business units - SPACE-analysis that also takes into account not forecasts of changes in the environment impact on the company. The aim of this paper is to develop methods of portfolio analysis on the basis of SPACE-dynamic analysis and formation of the list of possible strategic initiatives for definite basic trajectories of its strategic business units energy holding DTEK. Methods. SPACE-analysis, analytic hierarchy process, expert analysis. Results. The authors proposed a methodological approach to the implementation of dynamic SPACE-analysis company. The technique involves a strategic segmentation of the company, the formation of an expert group to assess reliable energy holding the current forecast period and on four aspects of SPACE-analysis. Also, using the analytic hierarchy determined by weighting the partial evaluation criteria. Methodology offers a "weighting" expert estimates within a particular group of partial criteria: sectors to "competitive advantage" and "stability branch" scale ratings is positive. The next phase involves the construction of vectors for the current and projected state holding that can be placed in one of four quadrants. Each quadrant has 4 basic strategic trajectory states, they can also be interpreted as a strategic gaps. In other words diagnosis of trajectories allows to identify and evaluate strategic gaps company or its individual business units according to specific criteria and receive partial numerical values of generalized gaps on key evaluation criteria. Conclusions. The authors matrix formed strategic decisions SPACE-dynamic analysis. The article graphically interpreted SPACE-analysis for the energy holding in three strategic business units. The study offers an integrated approach to the definition of policy recommendations for each strategic unit based on an analysis of superposition defined basic trajectories. S-trajectory or S-vectors can be represented as the sum of two vectors : numbers and appropriate call intensity factors relevant basic trajectories since their values determine the degree of contribution of each of these basic paths in the integrated S-vector is a vector strategic set of strategic business units to achieve strategic objectives, transfered into numerical form by partial criteria by expert predictive testing. These coefficients also make it possible to calculate the value of integrated strategic gaps generalized criteria. (shrink)

The most compelling extant accounts of explanation casts all explanations as causal. Yet there are sciences, theoretical population biology in particular, that explain their phenomena by appeal to statistical, non-causal properties of ensembles. I develop a generalised account of explanation. An explanation serves two functions: metaphysical and cognitive. The metaphysical function is discharged by identifying a counterfactually robust invariance relation between explanans event and explanandum. The cognitive function is discharged by providing an appropriate description of this relation. I offer examples (...) of explanations from portfolio theory and population genetics that meet this characterisation. In each case the invariance relation holds between a statistical property of an ensemble and a change in structure of the ensemble. In neither case, however, does the statistical property cause the outcome it explains. There are genuine statistical, non-causal scientific explanations. (shrink)

An extensive literature overlapping economics, statistical decision theory and finance, contrasts expected utility [EU] with the more recent framework of mean–variance (MV). A basic proposition is that MV follows from EU under the assumption of quadratic utility. A less recognized proposition, first raised by Markowitz, is that MV is fully justified under EU, if and only if utility is quadratic. The existing proof of this proposition relies on an assumption from EU, described here as “Buridan’s axiom” after the French (...) philosopher’s fable of the ass that starved out of indifference between two bales of hay. To satisfy this axiom, MV must represent not only “pure” strategies, but also their probability mixtures, as points in the (σ, μ) plane. Markowitz and others have argued that probability mixtures are represented sufficiently by (σ, μ) only under quadratic utility, and hence that MV, interpreted as a mathematical re-expression of EU, implies quadratic utility. We prove a stronger form of this theorem, not involving or contradicting Buridan’s axiom, nor any more fundamental axiom of utility theory. (shrink)

This paper argues that since the last decades of the twentieth century the discipline of modern finance has directed fiduciaries to act "rationally"—that is, in the sole financial interest of their funds--downplaying the effects of their investments on others. This approach has deemphasized a previous, more "reasonable" interpretation of fiduciary duty that drew on a conception of prudence characterized by wisdom, discretion and intelligence—one that accounts to a greater degree for the relationship between one's investments and their effects on others (...) in the world. The reasonable approach allows fiduciaries to a greater degree to assess the objective well-being of beneficiaries, to recognize fundamental sources of investment reward in the economy, and to fulfill their obligations to allocate benefits impartially between current and future generations. Reason and rationality can work in a complementary fashion to make investment long-term in its perspective and beneficial to society and the economy as well as to specific funds or portfolios. Determining how to accomplish this challenging task is part of the obligation of fiduciaries as they seek to realize the full potential of the investment assets entrusted to their care. (shrink)

This article explores the relationship between diversification and energy security risks. It uses portfolio theory to conceptualise energy security as an insurance mechanism against disruptions to energy import markets. It provides quantitative measures of systematic and specific risks associated with Japanese energy imports during the period 1970—99. It suggests that Japan's policy of diversification of energy import sources has reduced specific risks, although fundamental changes in the political and economic structure of international energy and, in particular, oil markets (...) have also significantly reduced systematic risks. The article concludes that, despite their limitations, portfolio measures provide a much more theoretically and methodologically robust indicator of energy import security than traditional measures of dependence. (shrink)

By now it has been pretty well established that the Flemish Jesuit Leonardus Lessius was an economist of the highest grade. Joseph A. Schumpeter, perhaps the 20th century’s most important historian of economics, afforded Lessius more than ample mention in his monumental work, History of Economic Analysis. In Interest and Usury, Schumpeter’s pupil, Bernard W. Dempsey, likewise gave Lessius generous attention. The Belgian historian Raymond de Roover, however, who considered Lessius to be primarily a deserving epigone of the famous ‘Salamanca (...) School’, did not completely share their enthusiasm, at least initially. De Roover’s somewhat lukewarm attitude was, nevertheless, drowned out by the laudatory contribution of Barry T. Gordon on the subject in his Economic Analysis Before Adam Smith. Robert Beutels brought respect to Lessius’ work in his bio-bibliographical essay published in 1987 and restored something of the honour due to Lessius which, according to Beutels, he had been unjustly denied, certainly in his own land.The image of Lessius presented by all these authors is uncommonly fresh, yet at the same time surprisingly familiar. In their works they have shown him to be a modern thinker who merits comparison with contemporary economists. His analyses give witness to his profound insight into the economy of his day and are still relevant, thought not directly applicable, for economists today. The market principle, portfolio theory, the quantity theory of money, and much more can, according to the authors we have mentioned, be found in Lessius. But does this rather trendy image of Lessius agree with the historical reality?An appropriate way to begin answering this question would be to examine his discussion on the lending of money and the taking of interest in his monumental tractate of 1605, On Justice and Law . Did Lessius endorse or reject the traditional proscription against usury? When did he consider it permissible to claim interest? To what extent did his moral judgment depend on an economic analysis of the phenomenon of interest? Perhaps the answers to these questions will enable us to judge Lessius as both economist and ethicist, as he rightly deserves. (shrink)

The capital approach is frequently used to model sustainability. A development is deemed to be sustainable when capital is not reduced. There are different definitions of sustainability, based on whether or not they allow that different forms of capital may be substituted for each other. A development that allows for the substitution of different forms of capital is called weakly sustainable. This article shows that in a risky world and a risk-averse society even under the assumptions of weak sustainability the (...) circumstances under which different forms of capital may be substituted are limited. This is due to the risk-reducing effect of diversification. Using Modern Portfolio Theory this article shows under which conditions substitution of different forms of capital increases risk for future generations. (shrink)

Sorensen presents a general theory of thought experiments: what they are, how they work, what are their virtues and vices. On Sorensen's view, philosophy differs from science in degree, but not in kind. For this reason, he claims, it is possible to understand philosophical thought experiments by concentrating on their resemblance to scientific relatives. Lessons learned about scientific experimentation carry over to thought experiment, and vice versa. Sorensen also assesses the hazards and pseudo-hazards of thought experiments. Although he grants (...) that there are interesting ways in which the method leads us astray, he attacks most scepticism about thought experiments as arbitrary. They should be used, he says, as they generally are used--as part of a diversified portfolio of techniques. All of these devices are individually susceptible to abuse, fallacy, and error. Collectively, however, they provide a network of cross-checks that make for impressive reliability. (shrink)

Most theories in economics and finance predict what people will do, given what they know about the world around them. But what do people know about their environments? The study of information choice seeks to answer this question, explaining why economic players know what they know--and how the information they have affects collective outcomes. Instead of assuming what people do or don't know, information choice asks what people would choose to know. Then it predicts what, given that information, they would (...) choose to do. In this textbook, Laura Veldkamp introduces graduate students in economics and finance to this important new research. The book illustrates how information choice is used to answer questions in monetary economics, portfolio choice theory, business cycle theory, international finance, asset pricing, and other areas. It shows how to build and test applied theory models with information frictions. And it covers recent work on topics such as rational inattention, information markets, and strategic games with heterogeneous information.Illustrates how information choice is used to answer questions in monetary economics, portfolio choice theory, business cycle theory, international finance, asset pricing, and other areas Teaches how to build and test applied theory models with information frictions Covers recent research on topics such as rational inattention, information markets, and strategic games with heterogeneous information. (shrink)

Feminist educators and theorists are stretching the boundaries of what it means to do religion and science. They are also expanding the theoretical and practical frameworks through which we might present curricula in thosefields. In this paper, I reflect on the implications of feminist pedagogies for the interdisciplinary field of religion and science. I begin with a brief discussion of feminist approaches to education and the nature of the feminist classroom as a setting for action. Next, I present some theoretical (...) and practical issues to consider when developing a feminist praxis and an antisexist curriculum. This leads into a discussion of the role of language and critical reflection in the religion and science classroom, the risks associated with reflective discourse, and considerations in the use of ‘feminist’ teaching tools such as small group work, journals, and portfolio assessment. Iconclude with a reflection on how feminist pedagogy promotes an epistemology that speaks to the hearts and minds of participants in the dialogue of religion and science. (shrink)

Due to the nature of lending practices and support services offered to the poor in developing countries, portfolio risk is a growing concern for the microfinance industry. Though previous research highlights the importance of risk for microfinance organizations, not much is known about how microfinance organizations can mitigate risks incurred from providing loans to the poor in developing countries. Further, though many microfinance organizations practice corporate social responsibility to help create economic and social wealth in developing countries, the impact (...) of such CSR practices remains an underdeveloped area of inquiry. We use a normative ethics lens to develop an ethics-based CSR theory that differentiates between three forms of ethics-based CSR—virtue, consequentialist, and deontological. We argue that while all three forms can help mitigate risk, virtue ethics-based CSR is potentially the most useful form of CSR toward mitigating microfinance portfolio risk. We test our hypotheses using a sample of microfinance organizations from across the world. Our findings suggest that virtue ethics-based CSR is not just an important philosophical paradigm; it can actually help mitigate microfinance portfolio risk when implemented in practice. (shrink)

Motivated by the analysis of a general optimal portfolio selection problem, which encompasses as special cases an optimal consumption and an optimal debt-arrangement problem, we are concerned with the questions of how a personality trait like risk-perception can be formalized and whether the two objectives of utility-maximization and risk-minimization can be both achieved simultaneously. We address these questions by developing an axiomatic foundation of preferences for which utility-maximization is equivalent to minimizing a utility-based shortfall risk measure. Our axiomatization hinges (...) on a novel axiom in decision theory, namely the risk-perception axiom. (shrink)

The purpose of this chapter is to outline some of the thinking behind new e-learning technology, including e-portfolios and personal learning environments. Part of this thinking is centered around the theory of connectivism, which asserts that knowledge - and therefore the learning of knowledge - is distributive, that is, not located in any given place (and therefore not 'transferred' or 'transacted' per se) but rather consists of the network of connections formed from experience and interactions with a knowing community. (...) And another part of this thinking is centered around the new, and the newly empowered, learner, the member of the net generation, who is thinking and interacting in new ways. These trends combine to form what is sometimes called 'e-learning 2.0' - an approach to learning that is based on conversation and interaction, on sharing, creation and participation, on learning not as a separate activity, but rather, as embedded in meaningful activities such as games or workflows. (shrink)

What does socially responsible investing (SRI) accomplish for investors and for society? Proponents of SRI claim that the practiceyields competitive portfolio returns for investors, while at the same time achieving better outcomes for society at large. Skepticsview SRI as ineffective at best and ill-conceived marketing hype at worst. My objective in this paper is to apply mainstream finance research findings to the question of whether SRI may be expected to lead to superior social outcomes. I conclude that under the (...) perfectmarkets assumptions underlying most finance theory, SRI will not affect social outcomes. However, given well documented imperfections in equity markets, the claim that SRI “makes a difference” to society is a reasonable one that is consistent with current theoretical and empirical research in finance. (shrink)

Can merely thinking about an imaginary situation provide evidence for how the world actually is--or how it ought to be? In this lively book, Roy A. Sorensen addresses this question with an analysis of a wide variety of thought experiments ranging from aesthetics to zoology. Presenting the first general theory of thought experiment, he sets it within an evolutionary framework and integrates recent advances in experimental psychology and the history of science, with special emphasis on Ernst Mach and Thomas (...) Kuhn. Sorensen explores what thought experiments are, how they work, and what their virtues and vices are. In his view, philosophy differs from science in degree, but not in kind. For this reason, he claims, it is possible to understand philosophical thought experiments by concentrating on their resemblance to scientific relatives. Sorensen assesses the hazards of thought experiments and grants that there are interesting ways in which the method leads us astray, but attacks most scepticism about thought experiments as arbitrary. He maintains that they should be used--as they generally are--as part of a diversified portfolio of techniques, creating a network of cross-checks that make for impressive reliability. (shrink)

ABSTRACT:The profound influence of Thomas Donaldson and Thomas Dunfee’s integrative social contracts theory on the field of business ethics has been challenged by Andreas Scherer and Guido Palazzo’s Habermasian approach, which has achieved prominence of late with articles that expressly question the defensibility of ISCT’s hypernorms. This article builds on recent efforts by Donaldson and Scherer to bridge their accounts by providing discursive foundations to the hypernorms at the heart of the ISCT framework. Extending prior literature, we propose an (...) ISCT* framework designed to retain ISCT’s practical virtue of managerial guidance while answering the demands of Scherer and Palazzo’s discursive account. By subscribing to a suitable portfolio of discursively justified hypernorms, we argue, companies unlock the valuable moral guidance of ISCT*, which says to treat these hypernorms as unequivocal outer bounds to the pursuit of business and as a starting point to tailor local norms through discursive stakeholder engagement. (shrink)