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February 8, 2008|Volume 36, Number 17


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Other SOM behavior research studies
explore consumers’ risk-taking ways

The following are some of the other behavioral research projects at Yale School of Management (SOM). (See related story.)


Stocks as lotteries

Economists have proposed many different models of how the stock market works. Virtually all of them assume that investors are risk-averse.

In “Stocks as Lotteries: The Implications of Probability Weighting for Security Prices,” Professor Nicholas Barberis of Yale SOM and his co-author Ming Huang of Cornell University argue that people are often actually risk-seeking.

There are instances — such as buying a lottery ticket — where people are willing to pay more for a bet than its actuarial value, they note, and the same may be true for lottery-like stocks. This insight may shed light on financial phenomena including the low average return on IPOs and the lack of diversification in many household portfolios.


Simplifying saving

Workers put off making important decisions, such as enrolling in an employer-sponsored 401(k), reducing their long-run wealth accumulation.

Companies can increase employee participation in savings plans by making the investment process easier, says James J. Choi, assistant professor of finance.

In “Simplification and Saving,” Choi and his Harvard co-authors studied a low-cost intervention that allows employees to enroll in savings plans with pre-selected contribution and asset allocation rates by checking a box on a card. Employee participation rates increased 10 to 20 percentage points in the companies studied.


Bubble investors: Exuberant, but not irrational

The boom in U.S. stock prices in the late 1990s is widely considered one of the biggest bubbles in financial history.

Professors William N. Goetzmann and Ravi Dhar surveyed investors who were active during this period and found that their purchases were motivated by a strong belief in their ability to identify under- and overvalued stocks through fundamental research.

Among the other findings the professors report in “Bubble Investors: What Were They Thinking?” is that more than half of investors surveyed admitted buying stocks that they believed to be overvalued with the anticipation that share prices would go higher.


T H I SW E E K ' SS T O R I E S

Study: Farming is changing chemistry of Mississippi River

Pink is the new Yale blue for teams raising funds . . .

‘Non-standard economist’ exploring motivations behind . . .

Other SOM behavior research studies explore consumers’ . . .

Yale librarian and skater passes on her passion to local youngsters

In new role at Yale, art conservator will exhance campus programs

Yale University Library starts the new year with staff changes

Drawings by European ‘masters’ are featured in gallery exhibit

Black History Month celebration features art, music and more

Yale Opera will present ‘Die Fledermaus’

Protection of cultural heritage is focus of ‘Iraq Beyond the Headlines’

In new exhibition, architects envision ‘a future that could have been’

Exhibition features unique gifts from around the globe

It takes two

First Yale BioHaven Entrepreneurship Seminar series event . . .

Memorial service will be held in Dwight Chapel

Conversation on health care


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