TEXT SIZE A A A

 

Findings Banner

Tuesday, August 4, 2015

Colorful history

Happiness in modern society: Why intelligence and ethnic composition matter

Satoshi Kanazawa & Norman Li
Journal of Research in Personality, forthcoming

Abstract:
Recent developments in evolutionary psychology suggest that living among others of the same ethnicity might make individuals happier and further that such an effect of the ethnic composition on life satisfaction may be stronger among less intelligent individuals. Data from the National Longitudinal Study of Adolescent Health showed that White Americans had significantly greater life satisfaction than all other ethnic groups in the US and this was largely due to the fact that they were the majority ethnic group; minority Americans who lived in counties where they were the numerical majority had just as much life satisfaction as White Americans did. Further, the association between ethnic composition and life satisfaction was significantly stronger among less intelligent individuals. The results suggest two important factors underlying life satisfaction and highlight the utility of integrating happiness research and evolutionary psychology.

---------------------

Segregated Diversity

Joanna Marie Pinto-Coelho & Tukufu Zuberi
Sociology of Race and Ethnicity, forthcoming

Abstract:
As both older and newer immigrant gateway metropolitan areas grow more racially diverse, scholars of neighborhood change want to know whether these areas are also becoming more residentially integrated. While it is logically and mathematically plausible to assume that increasing racial diversity directly leads to increased racial residential integration, this paper argues that the empirical reality may actually be the opposite. To investigate this concept, we use statistical and cartographic methods to analyze tract-level Census data of the Washington, D.C. metropolitan area, a case study that is both representative and unique. Results indicate that increasing racial diversity in the Washington, D.C. metropolitan area between 1990 and 2010 coincided with increased racial residential segregation. We discuss the theoretical and methodological implications of these findings and make recommendations for future research.

---------------------

A Culture of Disenfranchisement: How American Slavery Continues to Affect Voting Behavior

Avidit Acharya, Matthew Blackwell & Maya Sen
Harvard Working Paper, July 2015

Abstract:
In Shelby County v. Holder (2013), the Supreme Court struck down parts of the Voting Rights Act of 1965 on the argument that intervening history had attenuated many voting inequalities between blacks and whites. But how, where, and by how much have things changed, and does history still predict voting inequalities today? We show that those parts of the American South where slavery was more prevalent in the 1860s are today areas with lower average black voter turnout, larger numbers of election lawsuits alleging race-related constitutional violations, and more racial polarization in terms of party identification. To explain these findings, we present evidence showing that disfranchisement can linger over time and that the effects of restrictions on voting rights can persist culturally. Our findings also highlight the importance of looking at localized voting patterns as opposed to those at the state level, which can obscure historical relationships.

---------------------

From Vice to Virtue: Racial Boundaries and Redemption Narratives in Late 19th-Century Appalachian Feuds

Christi Smith
Race and Justice, forthcoming

Abstract:
While historians have documented the criminalization process of Blacks during the Jim Crow and Progressive Eras, few scholars include in their analyses the contemporaneous change in attitudes toward poor Whites. This study examines boundary processes and organizational activism in decriminalizing a particularly virulent and hypervisible series of violent events, the Appalachian feuds of the late 19th century. How are criminal acts committed by Whites rendered less criminal? Not only are Whites less likely to be brought before legal adjudication for criminal behavior, even when there is detailed evidence of their crimes, criminal acts can be made legitimate using redemption narratives that depict White violence as justifiable and even, as in the case here, indicative of a deeper moral worth. The decriminalization of Whites hinges on organized efforts by empowered actors to maintain and police racial boundaries. This article draws on independently collected archival materials including organizational records and financial reports, Board of Trustee records, interorganizational and private correspondence, and 727 newspaper articles.

---------------------

The Historical Demography of Racial Segregation

Angelina Grigoryeva & Martin Ruef
American Sociological Review, August 2015, Pages 814-842

Abstract:
Standard measures of residential segregation tend to equate spatial with social proximity. This assumption has been increasingly subject to critique among demographers and ethnographers and becomes especially problematic in historical settings. In the late nineteenth-century United States, standard measures suggest a counterintuitive pattern: southern cities, with their long history of racial inequality, had less residential segregation than urban areas considered to be more racially tolerant. By using census enumeration procedures, we develop a sequence measure that captures a more subtle "backyard" pattern of segregation, where white families dominated front streets and blacks were relegated to alleys. Our analysis of complete household data from the 1880 Census documents how segregation took various forms across the postbellum United States. Whereas northern cities developed segregation via racialized neighborhoods, substituting residential inequality for the status inequality of slavery, southern cities embraced street-front segregation that reproduced the racial inequality that existed under slavery.

---------------------

How the Legacy of Slavery and Racial Composition Shape Public School Enrollment in the American South

Robert Reece & Heather O'Connell
Sociology of Race and Ethnicity, forthcoming

Abstract:
History is centrally involved in place development. Given the historical importance of antebellum slavery, it is little surprise that it profoundly shaped the social and economic future of the United States. What is perhaps more surprising is the link to local, county-level development as it relates to contemporary systems of black disadvantage. Through our focus on one aspect of school segregation in the American South, namely racial disparities in public school enrollment, we contribute to the literature on the legacy of slavery by examining how this local link persists. We use spatial data analysis techniques to assess the relationship between county historical slave concentration and the black-white ratio of public school attendance. Our data originally come from the 1860 Census, 2006-2010 American Community Survey, and National Center for Education Statistics Private School Universe Survey, 2007-2008. Notably, our historical slave concentration estimates incorporate spatially informed refinements to better represent contemporary counties than previously available data. Drawing from our regression analysis, we argue that slavery history shaped the local social structure in a way that facilitates contemporary white disinvestment from public school systems. We examine two potential explanations for this legacy of slavery - the number of private schools and racial threat - particularly their manifestation within the Deep South. Despite evidence of subregional differences rooted in history, neither pathway explains the initial slavery association. We argue that processes tied to the legacy of slavery are a foundational component of black disadvantage and that further examination of this foundation is necessary to stem the tide of recent resegregation.

---------------------

Explaining the Persistence of Health Disparities: Social Stratification and the Efficiency-Equity Trade-off in the Kidney Transplantation System

Jonathan Daw
American Journal of Sociology, May 2015, Pages 1595-1640

Abstract:
Why do health disparities persist when their previous mechanisms are eliminated? Fundamental-cause theorists argue that social position primarily improves health through two metamechanisms: better access to health information and technology. I argue that the general, cumulative, and embodied consequences of social stratification can produce another metamechanism: an efficiency-equity trade-off. A case in point is kidney transplantation, where the mechanisms previously thought to link race to outcomes - ability to pay and certain factors in the kidney allocation system - have been greatly reduced, yet large disparities persist. I show that these current disparities are rooted in factors that directly influence posttransplant success, placing efficiency and racial/ethnic equity at cross-purposes.

---------------------

Racial Residential Segregation and Risky Sexual Behavior Among Non-Hispanic Blacks, National Survey of Family Growth, 2006 - 2010

Khaleeq Lutfi et al.
Social Science & Medicine, September 2015, Pages 95-103

Abstract:
Sexually transmitted infections (STIs) including human immunodeficiency virus (HIV) have disproportionately affected the non-Hispanic black population in the United States. A person's community can affect his or her STI risk by the community's underlying prevalence of STIs, sexual networks, and social influences on individual behaviors. Racial residential segregation-the separation of racial groups in a residential context across physical environments-is a community factor that has been associated with negative health outcomes. The objective of this study was to examine if non-Hispanic blacks living in highly segregated areas were more likely to have risky sexual behavior. Demographic and sexual risk behavior data from non-Hispanic blacks aged 15 - 44 years participating in the National Survey of Family Growth were linked to Core-Based Statistical Area segregation data from the U.S. Census Bureau. Five dimensions measured racial residential segregation, each covering a different concept of spatial variation. Multilevel logistic regressions were performed to test the effect of each dimension on sexual risk behavior controlling for demographics and community poverty. Of the 3,643 participants, 588 (14.5%) reported risky sexual behavior as defined as two or more partners in the last 12 months and no consistent condom use. Multilevel analysis results show that racial residential segregation was associated with risky sexual behavior with the association being stronger for the centralization [aOR (95% CI)][2.07 (2.05 - 2.08)] and concentration [2.05 (2.03 - 2.07)] dimensions. This suggests risky sexual behavior is more strongly associated with neighborhoods with high concentrations of non-Hispanic blacks and an accumulation of non-Hispanic blacks in an urban core. Findings suggest racial residential segregation is associated with risky sexual behavior in non-Hispanic blacks 15 - 44 years of age with magnitudes varying by dimension. Incorporating additional contextual factors may lead to the development of interventions that promote healthier behaviors and lower rates of HIV and other STIs.

---------------------

Decomposing Black-White Disparities in Heart Disease Mortality in the United States, 1973-2010: An Age-Period-Cohort Analysis

Michael Kramer, Amy Valderrama & Michele Casper
American Journal of Epidemiology, forthcoming

Abstract:
Against the backdrop of late 20th century declines in heart disease mortality in the United States, race-specific rates diverged because of slower declines among blacks compared with whites. To characterize the temporal dynamics of emerging black-white racial disparities in heart disease mortality, we decomposed race-sex-specific trends in an age-period-cohort (APC) analysis of US mortality data for all diseases of the heart among adults aged ?35 years from 1973 to 2010. The black-white gap was largest among adults aged 35-59 years (rate ratios ranged from 1.2 to 2.7 for men and from 2.3 to 4.0 for women) and widened with successive birth cohorts, particularly for men. APC model estimates suggested strong independent trends across generations ("cohort effects") but only modest period changes. Among men, cohort-specific black-white racial differences emerged in the 1920-1960 birth cohorts. The apparent strength of the cohort trends raises questions about life-course inequalities in the social and health environments experienced by blacks and whites which could have affected their biomedical and behavioral risk factors for heart disease. The APC results suggest that the genesis of racial disparities is neither static nor restricted to a single time scale such as age or period, and they support the importance of equity in life-course exposures for reducing racial disparities in heart disease.

---------------------

"A General Separation of Colored and White": The WWII Riots, Military Segregation, and Racism(s) beyond the White/Nonwhite Binary

Margarita Aragon
Sociology of Race and Ethnicity, forthcoming

Abstract:
This article uses archival research to explore important differences in the discursive and institutional positioning of Mexican American and African American men during World War II. Through the focal point of the riots that erupted in Los Angeles and other major cities in the summer of 1943, I examine the ways in which black and Mexican "rioters" were imagined in official and popular discourses. Though both groups of youth were often constructed as deviant and subversive, there were also divergences in the ways in which their supposed racial difference was discursively configured. I also consider the experiences of each group in the World War II military, a subject that has received little attention in previous work on the riots. Though both groups were subject to discrimination and brutality on the home front, only African Americans were segregated in the military - a fact that profoundly influenced the 1943 riots. Examining the very different conditions under which these men served, as well as the distinct ways in which their presence within the military and on the home front was interpreted and given meaning by press, law enforcement, and military officials, helps to illuminate the uneven and complex workings of racism in America, disrupting the common conceptualization of a definitive white/nonwhite color line.

---------------------

Segregation as Splitting, Segregation as Joining: Schools, Housing, and the Many Modes of Jim Crow

Andrew Highsmith & Ansley Erickson
American Journal of Education, August 2015, Pages 563-595

Abstract:
Popular understandings of segregation often emphasize the Jim Crow South before the 1954 Brown decision and, in many instances, explain continued segregation in schooling as the result of segregated housing patterns. The case of Flint, Michigan, complicates these views, at once illustrating the depth of governmental commitment to segregation in a northern community and showing how segregated schools and neighborhoods helped construct one another. The Flint case also reveals new modes of segregationist thought. Throughout much of the twentieth century, Flint's city leaders thought of segregation as splitting, and they sought to divide their city along racial lines. But they thought of segregation as joining as well. Drawing on various strands of progressive reform and educational thought, Flint's educational, business, and philanthropic leaders believed community bonds would be stronger in segregated neighborhoods anchored by their schools. Flint's "community schools" program worked toward this end, exemplifying the paired embrace of segregation as joining and splitting, and becoming a model for educators in hundreds of cities nationwide.

---------------------

Fertility, Economic Development, and Health in the Early Twentieth-Century U.S. South

Cheryl Elman, Andrew London & Robert McGuire
Journal of Interdisciplinary History, Autumn 2015, Pages 185-223

Abstract:
Between 1880 and 1910, fertility among African-American women dropped more precipitously than among white women, although black women's sociodemographic profile generally would not have predicted that trend. According to one perspective, regional differences in the timing of voluntary fertility control accounted for discrepancies by race. According to another, poor southern maternal health disproportionately affected African-American women's fecundity, reducing their fertility. Tests based on the 1910 ipums and the 1916 U.S. Plantation Census show that, during the first three years of marriage, African-American women's probabilities of having at least one birth, compared to white women's probabilities, declined as marital durations increased. However, the probability of having at least one birth was lower for African-American and white tenant-farm women whose counties had more plantation agriculture. Findings support the influence of health-related factors, possibly linked to plantation agricultural development, on the "supply" of children.

---------------------

Race, Class, and Gender and the Impact of Racial Segregation on Black-White Income Inequality

Melvin Thomas & Richard Moye
Sociology of Race and Ethnicity, forthcoming

Abstract:
African Americans have yet to achieve parity with whites in terms of income. A growing number of studies have identified several factors that have influenced the size of the racial gap, which has been found to vary by social class status and gender as well as across space. While most research has examined these factors separately, they may interact with each other in shaping racial inequality. Using an intersectional approach with a multilevel model, this study focuses on the impact of residential segregation and social class on racial differences in earnings for men and women. Findings indicate that (1) earning differences between African Americans remain after controls for socioeconomic status, gender, and other control variables; (2) racial differences increase with rising social class status; (3) segregation increases the disparity between African American and white males; and (4) among males only, segregation worsens the disparity that increases with rising social class.

---------------------

Perceived Discrimination and Incident Cardiovascular Events: The Multi-Ethnic Study of Atherosclerosis

Susan Everson-Rose et al.
American Journal of Epidemiology, 1 August 2015, Pages 225-234

Abstract:
Perceived discrimination is positively related to cardiovascular disease (CVD) risk factors; its relationship with incident CVD is unknown. Using data from the Multi-Ethnic Study of Atherosclerosis, a population-based multiethnic cohort study of 6,508 adults aged 45-84 years who were initially free of clinical CVD, we examined lifetime discrimination (experiences of unfair treatment in 6 life domains) and everyday discrimination (frequency of day-to-day occurrences of perceived unfair treatment) in relation to incident CVD. During a median 10.1 years of follow-up (2000-2011), 604 incident events occurred. Persons reporting lifetime discrimination in ?2 domains (versus none) had increased CVD risk, after adjustment for race/ethnicity and sociodemographic factors, behaviors, and traditional CVD risk factors (hazard ratio (HR) = 1.36, 95% confidence interval (CI): 1.09, 1.70) and after control for chronic stress and depressive symptoms (HR = 1.28, 95% CI: 1.01, 1.60). Reported discrimination in 1 domain was unrelated to CVD (HR = 1.05, 95% CI: 0.86, 1.30). There were no differences by race/ethnicity, age, or sex. In contrast, everyday discrimination interacted with sex (P = 0.03). Stratified models showed increased risk only among men (for each 1-standard deviation increase in score, adjusted HR = 1.14, 95% CI: 1.03, 1.27); controlling for chronic stress and depressive symptoms slightly reduced this association (HR = 1.11, 95% CI: 0.99, 1.25). This study suggests that perceived discrimination is adversely related to CVD risk in middle-aged and older adults.

By KEVIN LEWIS | 09:00:00 AM

Monday, August 3, 2015

Price signals

The High-Frequency Trading Arms Race: Frequent Batch Auctions as a Market Design Response

Eric Budish, Peter Cramton & John Shim
Quarterly Journal of Economics, forthcoming

Abstract:
The high-frequency trading arms race is a symptom of flawed market design. Instead of the continuous limit order book market design that is currently predominant, we argue that financial exchanges should use frequent batch auctions: uniform price double auctions conducted, e.g., every tenth of a second. That is, time should be treated as discrete instead of continuous, and orders should be processed in a batch auction instead of serially. Our argument has three parts. First, we use millisecond-level direct-feed data from exchanges to document a series of stylized facts about how the continuous market works at high-frequency time horizons: (i) correlations completely break down; which (ii) leads to obvious mechanical arbitrage opportunities; and (iii) competition has not affected the size or frequency of the arbitrage opportunities, it has only raised the bar for how fast one has to be to capture them. Second, we introduce a simple theory model which is motivated by, and helps explain, the empirical facts. The key insight is that obvious mechanical arbitrage opportunities, like those observed in the data, are built into the market design – continuous-time serial-processing implies that even symmetrically observed public information creates arbitrage rents. These rents harm liquidity provision and induce a never-ending socially-wasteful arms race for speed. Last, we show that frequent batch auctions directly address the flaws of the continuous limit order book. Discrete time reduces the value of tiny speed advantages, and the auction transforms competition on speed into competition on price. Consequently, frequent batch auctions eliminate the mechanical arbitrage rents, enhance liquidity for investors, and stop the high-frequency trading arms race.

---------------------

Household Production and Asset Prices

Zhi Da, Wei Yang & Hayong Yun
Management Science, forthcoming

Abstract:
We empirically examine the asset pricing implications of the Beckerian framework of household production, where utility is derived from both market consumption and home produced goods. We propose residential electricity usage as a real-time proxy for the service flow from household capital, because electricity is used in most modern-day household production activities and it cannot be easily stored. Using U.S. residential electricity usage from 1955 to 2012, our model based on household production explains the equity premium and the cross section of expected stock returns (including those of industry portfolios) with an R2 of 71%.

---------------------

Are bad times good news for the Securities and Exchange Commission?

Tim Lohse & Christian Thomann
European Journal of Law and Economics, August 2015, Pages 33-47

Abstract:
There exists a considerable debate in the literature investigating how stock market upswings or downswings impact financial market regulation. The present paper contributes to this literature and investigates whether financial market regulation follows a regulative cycle: does regulation, and consequently investor protection, increase as a result of a stock market downturn [as argued by, e.g., Zingales (J Account Res 47(2): 391–425, 2009)] or — contrary to the regulative cycle hypothesis — as a result of an upswing [as claimed by Povel et al. (Rev Financ Stud 20(4): 1219–1254, 2007), or Hertzberg 2003] Following Jackson and Roe (J Financ Econ 93(2): 207–238, 2009), we use funding data on the world’s most important financial market regulator, the U.S. Securities and Exchange Commission (SEC), as a proxy for the politically desired degree of regulation. We apply time series analysis. Using more than 60 years of data, we show that the SEC’s funding follows a regulative cycle: A weak stock market results in increased resources for the SEC. A strong stock market results in reduced resources. Our findings underline the downside of regulation as the regulative cycle amplifies the technical procyclicality inherent in regulation.

---------------------

Why Market Returns Favor Democrats in the White House?

Michael Long
Rutgers University Working Paper, May 2015

Abstract:
This study attempts to explain why the equity market earns greater returns for bearing risk when a Democrat is President in the USA versus a Republican. We look at data from 1929 through 2012. The data show that the value weighted return minus the corresponding period’s risk free rate is 10.83% when a Democrat is President, versus a corresponding return of -1.20% under Republican Presidents. We see the two basic macroeconomic arguments that should affect market value between the two parties: differences in risk free interest rates and differences in economic growth. On average the Democrats follow a policy of low interest rates. The rate of return on short term T-bills averages 4.55% under the GOP and a 2.48% under Democrats. Further, the Democrats overall economic policies create a higher average real growth rate with a 4.8% average versus only 1.8% under Republican administrations. These together do not explain the differences in equity market returns. Using a basic OLS approach with annual value weighted market returns minus the corresponding risk free rate as the dependent variable, neither interest rates nor real economic growth are significant in explaining returns though the party in power is significant.

---------------------

Financial intermediaries in the midst of market manipulation: Did they protect the fool or help the knave?

Vladimir Atanasov et al.
Journal of Corporate Finance, forthcoming

Abstract:
We examine a fund manager's alleged manipulation of platinum and palladium futures settlement prices. Using benchmarks from parallel electronic markets, we find that the manager’s market-on-close trading causes significant settlement price artificiality. Defying predictions that competition among floor traders should limit any artificiality, the artificiality increases in the second half of the alleged manipulation period. Between 35% and 52% of the latter-period artificiality is directly attributable to noncompetitive floor prices. Inflated floor volume contributes a similar proportion to artificiality via the exchange’s trade-weighted settlement price formula. We estimate that floor counterparties reaped more than $6.0 million in excess profits.

---------------------

Hedge Fund Crowds and Mispricing

Richard Sias, H.J. Turtle & Blerina Zykaj
Management Science, forthcoming

Abstract:
Recent models and the popular press suggest that large groups of hedge funds follow similar strategies resulting in crowded equity positions that destabilize markets. Inconsistent with this assertion, we find that hedge fund equity portfolios are remarkably independent. Moreover, when hedge funds do buy and sell the same stocks, their demand shocks are, on average, positively related to subsequent raw and risk-adjusted returns. Even in periods of extreme market stress, we find no evidence that hedge fund demand shocks are inversely related to subsequent returns. Our results have important implications for the ongoing debate regarding hedge fund regulation.

---------------------

Do social factors influence investment behavior and performance? Evidence from mutual fund holdings

Arian Borgers et al.
Journal of Banking & Finance, forthcoming

Abstract:
When tastes affect investment decisions of a significant number of investors they have the potential to affect asset prices and consequently also expected returns (Fama and French, 2007). In this paper we evaluate whether tastes for socially sensitive stocks affect holdings of U.S. equity mutual funds. We start with a comparison of socially responsible investment funds to conventional funds and document on the existence of conventional funds that have “more socially responsible” holdings than SRI labeled funds. Subsequently, we analyze whether these exposures to socially sensitive stocks affect mutual fund performance. Our findings indicate that especially investments in Tobacco, Alcohol, and Gambling stocks have the potential to positively affect risk-adjusted fund returns, while exposures to the most socially responsible firms negatively affect performance. This potential is not fully exploited by the mutual funds in our sample as they hold diversified portfolios resulting in small exposure differences between funds. These small exposure differences also explain why the literature has generally found no performance differences between SRI labeled and conventional funds. Based on our main findings we advice the use of holdings based analyses when investigating the effects of social tastes on investment portfolios.

---------------------

Perceptions and Price: Evidence from CEO Presentations at IPO Roadshows

Elizabeth Blankespoor, Bradley Hendricks & Gregory Miller
Stanford Working Paper, May 2015

Abstract:
This paper examines the relation between rapidly formed basic cognitive impressions of management and firm valuation. We develop a composite measure of investor perception using 30-second content-filtered video clips of initial public offering (IPO) roadshow presentations. We show that this measure, designed to capture viewers’ impressions of a CEO’s competence, trustworthiness, and attractiveness, is positively associated with an IPO firm’s secondary market value. The result is robust to controls for traditional determinants of firm value. We also show that firms with highly perceived management are more likely to be matched to high-quality underwriters. Finally, we examine components of IPO price formation and find that our composite measure of perception is positively associated with both the price proposed for the offering and the price revision that occurs from this proposed price to the firm’s secondary market valuation. Taken together, our results provide evidence that investors’ instinctive impressions of management are incorporated into investors’ assessments of firm value.

---------------------

Institutional Trading during a Wave of Corporate Scandals: “Perfect Payday”?

Gennaro Bernile, Johan Sulaeman & Qin Wang
Journal of Corporate Finance, forthcoming

Abstract:
This paper examines the role of institutional trading during the option backdating scandal of 2006-2007. Unlike their inability to anticipate other corporate events, institutional investors as a group display negative abnormal trading imbalances (i.e., buy minus sell volumes) in anticipation of firm-specific backdating exposures. Consistent with informed trading, the underlying trades earn positive abnormal short- and long-term profits. Moreover, the negative abnormal imbalances are larger in magnitude when backdating is likely a more severe issue. Local institutions, in particular, display negative trading imbalances earlier in event-time and earn consistently higher trading profits than non-local institutions. Although we find some evidence of over-reaction following the arrival of information about the backdating scandal, these patterns are short-lived and exclusively due to the activity of non-local institutions. Overall, institutional investors behave as informed investors, particularly in local stocks, during this prolonged period of heightened uncertainty about corporate reporting and governance practices.

---------------------

Stock Ownership and Political Behavior: Evidence from Demutualizations

Markku Kaustia, Samuli Knüpfer & Sami Torstila
Management Science, forthcoming

Abstract:
A setting in which customer-owned mutual companies converted to publicly listed firms created a plausibly exogenous increase in stock ownership. We use this shock to identify the effect of ownership of publicly listed shares on political behavior. Using instrumental variable regressions, difference-in-differences analyses, and matching methods, we find the shock changed the way people vote in the affected areas, with the demutualizations being followed by a 1.7–2.7-percentage-point increase in right-of-center vote share. Analyses of demutualizations that did not involve public listing of shares suggest that explanations based on wealth, liquidity, and tax-related incentives do not drive the results, and that the ownership of publicly listed shares was instrumental in generating the increase in conservative voting.

---------------------

Thinking Outside the Borders: Investors’ Underreaction to Foreign Operations Information

Xing Huang
Review of Financial Studies, forthcoming

Abstract:
I use industry-level returns in foreign markets to examine the hypothesis that value-relevant foreign information slowly diffuses into the stock prices of U.S. multinational firms. A trading strategy that exploits foreign information generates abnormal returns of 0.8% monthly. I find that the market responds more slowly in periods with lower media coverage of foreign news and to information from more linguistically and culturally distant countries. These results suggest that both investors’ inattention and lack of understanding of foreign information slow the incorporation of new information into prices. I further separate these two mechanisms by examining market responses to earnings surprises.

---------------------

Cortisol and testosterone increase financial risk taking and may destabilize markets

Carlos Cueva et al.
Scientific Reports, July 2015

Abstract:
It is widely known that financial markets can become dangerously unstable, yet it is unclear why. Recent research has highlighted the possibility that endogenous hormones, in particular testosterone and cortisol, may critically influence traders’ financial decision making. Here we show that cortisol, a hormone that modulates the response to physical or psychological stress, predicts instability in financial markets. Specifically, we recorded salivary levels of cortisol and testosterone in people participating in an experimental asset market (N = 142) and found that individual and aggregate levels of endogenous cortisol predict subsequent risk-taking and price instability. We then administered either cortisol (single oral dose of 100 mg hydrocortisone, N = 34) or testosterone (three doses of 10 g transdermal 1% testosterone gel over 48 hours, N = 41) to young males before they played an asset trading game. We found that both cortisol and testosterone shifted investment towards riskier assets. Cortisol appears to affect risk preferences directly, whereas testosterone operates by inducing increased optimism about future price changes. Our results suggest that changes in both cortisol and testosterone could play a destabilizing role in financial markets through increased risk taking behaviour, acting via different behavioural pathways.

---------------------

Once Burned, Twice Shy: Money Market Fund Responses to a Systemic Liquidity Shock

Philip Strahan & Başak Tanyeri
Journal of Financial and Quantitative Analysis, April 2015, Pages 119-144

Abstract:
After Lehman’s collapse in 2008, investors ran from risky money market funds. In 27 funds, outflows overwhelmed cash inflows, thus forcing asset sales. These funds sold their safest and most liquid holdings. Funds were thus left with riskier and longer maturity assets. Over the subsequent quarter, however, the hard-hit funds reduced risk more than other funds. In contrast, money funds hit by idiosyncratic liquidity shocks before Lehman did not alter portfolio risk. The result suggests that moral hazard concerns with the Treasury Guarantee of investor claims did not increase risk taking. Funds that benefited most from the government bailout reduced risk.

---------------------

The Public Corporation as an Intermediary between “Main Street” and “Wall Street”

Ramesh Rao
Journal of Corporate Finance, forthcoming

Abstract:
In the perfect markets corporate finance theory (Modigliani-Miller), public corporations (firms) have no economic function. Their existence therefore cannot be justified. An unsettling implication is that the extant corporate finance theory applies to an economy in which firms are irrelevant. This research precludes this implication by identifying an economic function for firms in perfect markets. Specifically, I show that firms exist to intermediate between “Main Street” (the real sector that supplies non-financial inputs) and “Wall Street” (the financial sector that supplies cash), and that this intermediation maximizes an investment’s operating cash flows by minimizing the cost of the non-financial inputs. Key implications of this rationale for the firm include: i) an investment’s NPV depends on the firm’s cash holdings; working capital policy is thus an integral part of investment policy, ii) operating characteristics determine the firm’s minimum size (equity capitalization) and “boundaries,” and iii) cash on corporate balance sheets is a “fundamental” for stock-pricing.

---------------------

Active Managers Are Skilled

Jonathan Berk & Jules Van Binsbergen
Stanford Working Paper, June 2015

Abstract:
Active fund managers are skilled and, on average, have used their skill to generate about $3.2 million per year. Large cross-sectional differences in skill persist for as long as ten years. Investors recognize this skill and reward it by investing more capital in funds managed by better managers. These funds earn higher aggregate fees, and a strong positive correlation exists between current compensation and future performance.

---------------------

Exchange trading rules, surveillance and suspected insider trading

Michael Aitken, Douglas Cumming & Feng Zhan
Journal of Corporate Finance, forthcoming

Abstract:
We examine the impact of stock exchange trading rules and surveillance on the frequency and severity of suspected insider trading cases in 22 stock exchanges around the world over the period January 2003 through June 2011. Using new indices for market manipulation, insider trading, and broker-agency conflict based on the specific provisions of the trading rules of each stock exchange, along with surveillance to detect non-compliance with such rules, we show that more detailed exchange trading rules and surveillance over time and across markets significantly reduce the number of suspected cases, but increase the profits per suspected case.

---------------------

Wealth transfers via equity transactions

Richard Sloan & Haifeng You
Journal of Financial Economics, forthcoming

Abstract:
Previous research indicates that firms issue shares when their stock is overpriced and repurchase shares when their stock is underpriced. Such transactions transfer wealth from transacting stockholders to ongoing stockholders. We quantify the magnitude of these wealth transfers and analyze their implications. Strikingly, we find that for the average firm-year, these wealth transfers approximate 40% of net income. We also find that these wealth transfers can be predicted using a variety of firm characteristics and that future wealth transfers are an important determinant of current stock prices.

---------------------

Do Happy People Make Optimistic Investors?

Guy Kaplanski et al.
Journal of Financial and Quantitative Analysis, April 2015, Pages 145-168

Abstract:
Do happy people predict future risk and return differently from unhappy people, or do individuals rely only on economic facts? We survey investors on their subjective sentiment-creating factors, return and risk expectations, and investment plans. We find that noneconomic factors systematically affect return and risk expectations, where the return effect is more profound. Investment plans are also affected by noneconomic factors. Sports results and general feelings significantly affect predictions. Sufferers from seasonal affective disorder have lower return expectations in the autumn than in other seasons, supporting the winter blues hypothesis.

---------------------

Credit Conditions and Stock Return Predictability

Sudheer Chava, Michael Gallmeyer & Heungju Park
Journal of Monetary Economics, September 2015, Pages 117–132

Abstract:
U.S. stock return predictability is analyzed using a measure of credit standards (Standards) derived from the Federal Reserve Board's Senior Loan Officer Opinion Survey on Bank Lending Practices. Standards is a strong predictor of stock returns at a business cycle frequency, especially in the post-1990 data period. Empirically, a tightening of Standards predicts lower future stock returns. Standards performs well both in-sample and out-of-sample and is robust to a host of consistency checks. Standards captures stock return predictability at a business cycle frequency and is driven primarily by the ability of Standards to predict cash flow news.

---------------------

Career Concerns of Banking Analysts

Joanne Horton, George Serafeim & Shan Wu
Harvard Working Paper, April 2015

Abstract:
We study how career concerns influence banking analysts’ forecasts and how their forecasting behavior benefits both them and bank managers. We show that banking analysts issue early in the year relatively more optimistic and later in the year more pessimistic forecasts for banks that could be their future employers. This pattern is not observed when the same analysts forecast earnings of companies that are not likely to be their future employers. Moreover, we use the Global Settlement as an exogenous shock, which limited outside opportunities and therefore exacerbated career concerns, and show that this forecast pattern is more pronounced after the Settlement. Both analysts and bank executives benefit from this behavior. Analysts issuing more biased forecasts for potential future employers are more likely to face favorable career outcomes and bank executives appear to profit from the analysts bias since the bias is associated with higher levels of insider trading. Our results highlight the bias created by asking analysts to rate their outside opportunities in the labor market.

---------------------

Propagation of Financial Shocks: The Case of Venture Capital

Richard Townsend
Management Science, forthcoming

Abstract:
This paper investigates how venture-backed companies are affected when others sharing the same investor suffer a negative shock. In theory, companies may be helped or hurt in this scenario. To examine the topic empirically, I estimate the impact of the collapse of the technology bubble on non-information-technology (non-IT) companies that were held alongside Internet companies in venture portfolios. Using a difference-in-differences framework, I find that the end of the bubble was associated with a significantly larger decline in the probability of raising continuation financing for these non-IT companies in comparison to others. This does not appear to be driven by unobservable company characteristics such as company quality or IT relatedness; for the same portfolio company receiving capital from multiple venture firms, investors with greater Internet exposure were significantly less likely to continue to participate in follow-on rounds.

---------------------

Social interaction at work

Hans Hvide & Per Östberg
Journal of Financial Economics, forthcoming

Abstract:
Stock market investment decisions of individuals are positively correlated with those of coworkers. Sorting of unobservably similar individuals to the same workplaces is unlikely to explain this pattern, as evidenced by the investment behavior of individuals who move between plants. Purchases made under stronger coworker purchase activity are not associated with higher returns. Moreover, social interaction appears to drive the purchase of within-industry stocks. Overall, we find a strong influence of coworkers on investment choices, but not an influence that improves the quality of investment decisions.

---------------------

Access to Credit and Stock Market Participation

Serhiy Kozak & Denis Sosyura
University of Michigan Working Paper, April 2015

Abstract:
We exploit staggered removals of interstate banking restrictions to identify the causal effect of access to credit on households’ stock market participation and asset allocation. Using micro data on retail brokerage accounts and proprietary data on personal credit histories, we document two effects of the loosening of credit constraints on households’ financial decisions. First, households enter the stock market by opening new brokerage accounts. Second, households increase their asset allocation to risky assets and reduce their allocation to cash, consistent with a lower need for precautionary savings. The effects are stronger for younger and more credit constrained investors. Overall, we establish one of the first direct links between access to credit and households’ investment decisions.

By KEVIN LEWIS | 09:00:00 AM

Sunday, August 2, 2015

We're close

Personality and Geography: Introverts Prefer Mountains

Shigehiro Oishi, Thomas Talhelm & Minha Lee
Journal of Research in Personality, October 2015, Pages 55–68

Abstract:
In five studies, we tested the link between personality and geography. We found that mountain-lovers were more introverted than ocean-lovers (Study 1). People preferred the ocean over mountains when they wanted to socialize with others, but they preferred the mountains and the ocean equally when they wanted to decompress alone (Study 2). In Study 3, we replicated the introversion-extraversion differences using pictures of mountains and oceans. Furthermore, this difference was explained in part by extraverts’ perception that it would take more work to have fun in the mountains than in the ocean. Extending the first three studies to non-students, we found that residents of mountainous U.S. states were more introverted than residents of flat states (Study 4). In Study 5, we tested the link between introversion and the mountains experimentally by sending participants to a flat, open area or a secluded, wooded area. The terrain did not make people more introverted, but introverts were happier in the secluded area than in the flat/open area, which is consistent with the person-environment fit hypothesis.

---------------------

Preferences for Visible White Sclera in Adults, Children and Autism Spectrum Disorder Children: Implications of the Cooperative Eye Hypothesis

Nancy Segal, Aaron Goetz & Alberto Maldonado
Evolution and Human Behavior, forthcoming

Abstract:
Visible white sclera (i.e., the opaque white outer coat enclosing the eyeball) is a uniquely human trait. An explanation for why such coloration evolved has been put forward by the Cooperative Eye Hypothesis (Kobayashi and Hashiya, 2011; Kobayashi and Koshima, 1997, 2001; Tomasello et al., 2007), which states that visible white sclera evolved to facilitate communication via joint attention and signaling of gaze direction. Therefore, we hypothesized that viewers comprised of both typically developing children and adults would show reliable preferences for stimuli with visible white sclera. However, because autism spectrum disorder (ASD) individuals have impaired social cognition and show gaze aversion, we also hypothesized that ASD children would show no consistent preference for eyes with visible white sclera. We tested these hypotheses by obtaining participants’ preferences across six sets of stuffed animals, identical but for the manipulation of eye size, eye color, and presence of visible sclera. Both hypotheses were supported. In addition to providing evidence consistent with the Cooperative Eye Hypothesis, our results also suggest that eyes and gaze serve a central role in social cognition. Furthermore, our results from ASD children have practical applications for therapeutic practices and evidence-based interventions.

---------------------

Does Facebook Magnify or Mitigate Threats to Belonging?

Megan Knowles, Nathaniel Haycock & Iqra Shaikh
Social Psychology, forthcoming

Abstract:
Previous research has yielded mixed findings regarding the interpersonal causes and consequences of Facebook use. The current research examines the role of belonging needs in motivating Facebook use and the protective value of Facebook following exclusion. In four studies we: manipulated exclusion and observed participants’ behavioral preferences (Study 1); measured participants’ belonging needs and their Facebook use (Study 2); and manipulated exclusion, exposed participants to either their Facebook photos/pages or control photos/pages, and measured need satisfaction and aggression (Studies 3–4). We found that exclusion motivated computer-mediated communication, and belonging needs predicted Facebook use. Also, exposure to Facebook protected excluded individuals’ social needs and mitigated aggressive behavior. Altogether, these studies suggest that Facebook is a powerful tool that allows individuals to reaffirm their social bonds.

---------------------

Some “Thing” to Talk About? Differential Story Utility From Experiential and Material Purchases

Amit Kumar & Thomas Gilovich
Personality and Social Psychology Bulletin, forthcoming

Abstract:
Psychological research has shown that experiential purchases (a hike in the woods, a trip to Rome) bring more happiness than material purchases (a designer shirt, a flat-screen television). The research presented in this article investigates one cause and consequence of this difference: People talk more about their experiences than their possessions and derive more value from doing so. A series of eight studies demonstrate that taking away the ability to talk about experiences (but not material goods) would diminish the enjoyment they bring; that people believe they derive more happiness from talking about experiential purchases; that when given a choice about which of their purchases to talk about, people are more likely to talk about experiential rather than material consumption; and that people report being more inclined to talk about their experiences than their material purchases and derive more hedonic benefits as a result — both in prospect and in retrospect.

---------------------

Why Do the Lonely Stay Lonely? Chronically Lonely Adolescents’ Attributions and Emotions in Situations of Social Inclusion and Exclusion

Janne Vanhalst et al.
Journal of Personality and Social Psychology, forthcoming

Abstract:
The goal of this study was to identify mechanisms associated with chronic loneliness by examining the effect of adolescents’ accumulated history of loneliness on responses to new social situations. Specifically, this study investigated whether attributions and emotions in situations of social inclusion and exclusion differ between chronically lonely adolescents and adolescents with a different loneliness history. A total of 730 adolescents (Mage at Wave 1 = 15.43 years) participated in a 4-wave longitudinal study with annual loneliness assessments. A chronic loneliness trajectory was identified, in addition to low-stable, moderate-stable, moderate-increasing, and high-decreasing loneliness trajectories. At Wave 4, vignettes depicting social inclusion and exclusion were presented, and participants rated a set of attributions and emotions following each vignette. Compared with individuals following other trajectories, chronically lonely adolescents were characterized by hypersensitivity to social exclusion (i.e., higher levels of negative emotions) and hyposensitivity to social inclusion (i.e., lower levels of enthusiasm). Further, chronically lonely adolescents had a stronger tendency to attribute social inclusion to circumstantial factors and social exclusion to internal and stable characteristics. This maladaptive attribution style partially mediated their emotional experiences. Together, results indicate that chronically lonely individuals respond to social situations in ways that may perpetuate rather than reduce their loneliness.

---------------------

Are you feeling what I’m feeling? The role of facial mimicry in facilitating reconnection following social exclusion

Elaine Cheung, Erica Slotter & Wendi Gardner
Motivation and Emotion, August 2015, Pages 613-630

Abstract:
The present work investigated the interpersonal functions of facial mimicry after social exclusion. Specifically, we examined two distinct functions that facial mimicry may serve in promoting reconnection: facilitating the understanding of others’ emotions and/or fostering interpersonal rapport. Using a novel facial mimicry paradigm, we found that although people exhibited both greater facial mimicry (Studies 1 and 2) and superior emotion-decoding accuracy (Study 2) after exclusion, facial mimicry did not mediate the relationship between exclusion and decoding accuracy (Study 2). Instead, we found support for facial mimicry serving to promote interpersonal rapport. Specifically, in Study 3, naïve judges rated videos of target-participant pairs from Study 1 for social closeness. Findings indicated that pairs with a previously-excluded participant were rated as socially closer than pairs with a previously-included participant (Study 3). Importantly, enhanced facial mimicry was found to mediate the relationship between exclusion and rated closeness. Altogether these findings suggest that facial mimicry may promote reconnection after social exclusion by fostering rapport.

---------------------

Good Liars Are Neither ‘Dark’ Nor Self-Deceptive

Gordon Wright et al.
PLoS ONE, June 2015

Abstract:
Deception is a central component of the personality 'Dark Triad' (Machiavellianism, Psychopathy and Narcissism). However, whether individuals exhibiting high scores on Dark Triad measures have a heightened deceptive ability has received little experimental attention. The present study tested whether the ability to lie effectively, and to detect lies told by others, was related to Dark Triad, Lie Acceptability, or Self-Deceptive measures of personality using an interactive group-based deception task. At a group level, lie detection accuracy was correlated with the ability to deceive others — replicating previous work. No evidence was found to suggest that Dark Triad traits confer any advantage either to deceive others, or to detect deception in others. Participants who considered lying to be more acceptable were more skilled at lying, while self-deceptive individuals were generally less credible and less confident when lying. Results are interpreted within a framework in which repeated practice results in enhanced deceptive ability.

---------------------

Relational Mobility Increases Social (but Not Other) Risk Propensity

Liman Man Wai Li, Takeshi Hamamura & Glenn Adams
Journal of Behavioral Decision Making, forthcoming

Abstract:
In recent years, we have witnessed a resurgent focus on ecological features, especially various forms of mobility that afford social psychological processes. Extending this work, the current research examined whether relational mobility affects risk propensity. We conducted three studies using both correlational (Studies 1 and 3) and experimental (Study 2) methods. Results provide support for the hypothesis that perceptions of relational mobility are associated with risk propensity in the domain of interpersonal behaviors but not other risk domains (health, financial, etc.). Findings in Study 3 suggested that the association between relational mobility and propensity for risky interpersonal behaviors may stem from the effect of relational mobility in lowering subjective risk (but not in increasing expected benefits) of such behaviors.

---------------------

The combined effects of relationship conflict and the relational self on creativity

Eun Jin Jung & Sujin Lee
Organizational Behavior and Human Decision Processes, September 2015, Pages 44–57

Abstract:
Studies have consistently found that relationship conflict adversely affects work outcomes, prompting the conclusion that such conflict should be avoided. Challenging this established finding, we propose that relationship conflict has a positive effect on creativity when the relational self is salient. Specifically, we hypothesize that relational selves’ relationship-focused goal may be frustrated within a conflictual (vs. harmonious) relationship situation, triggering cognitive persistence that boosts their creativity by causing them to think in more depth and detail about their conflict. Data from the US (Experiment 1) and Korea (Experiment 2) supported our hypotheses. A subsequent study extended these findings to process conflict (Experiment 3). Our research highlights the overall finding that frustration of goals that are meaningful for individuals promotes their creativity through the mediation of cognitive persistence.

By KEVIN LEWIS | 09:00:00 AM

Saturday, August 1, 2015

On notice

Art and Authenticity: Behavioral and Eye-Movement Analyses

Paul Locher, Elizabeth Krupinski & Alexandra Schaefer
Psychology of Aesthetics, Creativity, and the Arts, forthcoming

Abstract:
The aim of this study was to investigate the influence of viewers’ beliefs about the authenticity of paintings on the way they are visually explored and aesthetically evaluated. Thirty art-sophisticated and naïve adults were shown digital versions of paintings by renowned artists under 3 alleged authenticity status conditions: originals, copies, or fakes. Participants’ eye-movements, verbal reactions to the stimuli, and self-perceived scanning strategies were recorded as they evaluated, for unlimited time, the pleasantness, artistic merit, and monetary value of each artwork. Overall, findings provide evidence that viewers’ beliefs about the authenticity status of a painting serve as a context cue that triggers, in a direct and indirect or mediated top-down fashion, naïve and sophisticated viewers’ behavioral and visual responses to art.

---------------------

Seeing the world through “Pink Colored Glasses”: The link between optimism and pink

Kalay-Shahin Lior et al.
Journal of Personality, forthcoming

Objective: This study investigated optimism, which is considered a personality trait, from Grounded Cognition perspective. Three experiments were conducted to investigate the association between pink and optimism.

Method: In experiment 1a, 22 undergraduates (10 females, Mage=23.68) were asked to classify words as optimistic or pessimistic as fast as possible. Half the words were presented in pink and half in black. Experiment 1b (n=24, 14 females, Mage=22.82) was identical to 1a except for the color of the words - black and light blue instead of pink - to rule out the possible influence of brightness. Experiment 2 exposed 144 participants (74 females, Mage=25.18) to pink or yellow and then measured their optimism level.

Results: The findings for experiments 1a and 1b indicated an association between pink and optimism regardless of brightness. Experiment 2 found that mere exposure to pink increased optimism levels for females.

Conclusion: These results contribute to the dynamic view of personality, current views on optimism, and the growing literature on Grounded Cognition.

---------------------

The Curse of Curves

Jacob Vigil et al.
Human Nature, June 2015, Pages 235-254

Abstract:
This study examines the associations between objective and subjective measurements and impressions of body shape and cold pressor pain reporting in healthy adults. On the basis of sexual selection theory (SST), we hypothesized that body characteristics that are universally preferred by the opposite sex — specifically, lower waist-to-hip ratios (WHR) in women and higher shoulder-to-hip ratios (SHR) in men — and characteristics (e.g., proportion of body fat in women) that infer attractiveness differently across cultures will correspond to higher experimental pain reporting in women and lower pain reporting in males. A convenience sample of young adults (n = 96, 58 females, 18–24 years; mean age = 19.4) was measured for body mass index (BMI), WHR, SHR, and subjective body impressions (SBI), along with cold pressor pain reporting. The findings showed that BMI was positively associated with WHR and less-positive SBI in both sexes. Consistent with SST, however, only BMI and WHR predicted variability in pain expression in women, whereas only SHR predicted variability in men. Subjective body impressions were positively associated with SHR among males and unrelated to WHR among females, yet only females showed a positive association between SBI and higher pain reporting. The findings suggest that sexually selected physical characteristics (WHR and SHR) and culturally influenced somatic (BMI) and psychological (SBI) indicators of attractiveness correspond with variability in pain reporting, potentially reflecting the general tendency for people to express clusters of sexually selected and culturally influenced traits that may include differential pain perception.

---------------------

Negative emotional stimuli enhance vestibular processing

Nora Preuss, Andrew Ellis & Fred Mast
Emotion, August 2015, Pages 411-415

Abstract:
Recent studies have shown that vestibular stimulation can influence affective processes. In the present study, we examined whether emotional information can also modulate vestibular perception. Participants performed a vestibular discrimination task on a motion platform while viewing emotional pictures. Six different picture categories were taken from the International Affective Picture System: mutilation, threat, snakes, neutral objects, sports, and erotic pictures. Using a Bayesian hierarchical approach, we were able to show that vestibular discrimination improved when participants viewed emotionally negative pictures (mutilation, threat, snake) when compared to neutral/positive objects. We conclude that some of the mechanisms involved in the processing of vestibular information are also sensitive to emotional content. Emotional information signals importance and mobilizes the body for action. In case of danger, a successful motor response requires precise vestibular processing. Therefore, negative emotional information improves processing of vestibular information.

---------------------

The close proximity of threat: Altered distance perception in the anticipation of pain

Abby Tabor et al.
Frontiers in Psychology, May 2015

Abstract:
Pain is an experience that powerfully influences the way we interact with our environment. What is less clear is the influence that pain has on the way we perceive our environment. We investigated the effect that the anticipation of experimental pain (THREAT) and its relief (RELIEF) has on the visual perception of space. Eighteen (11F) healthy volunteers estimated the distance to alternating THREAT and RELIEF stimuli that were placed within reachable space. The results determined that the estimated distance to the THREAT stimulus was significantly underestimated in comparison to the RELIEF stimulus. We conclude that pain-evoking stimuli are perceived as closer to the body than otherwise identical pain-relieving stimuli, an important consideration when applied to our decisions and behaviors in relation to the experience of pain.

---------------------

A Mechanistic Link between Olfaction and Autism Spectrum Disorder

Liron Rozenkrantz et al.
Current Biology, 20 July 2015, Pages 1904–1910

Abstract:
Internal action models (IAMs) are brain templates for sensory-motor coordination underlying diverse behaviors. An emerging theory suggests that impaired IAMs are a common theme in autism spectrum disorder (ASD). However, whether impaired IAMs occur across sensory systems and how they relate to the major phenotype of ASD, namely impaired social communication, remains unclear. Olfaction relies on an IAM known as the sniff response, where sniff magnitude is automatically modulated to account for odor valence. To test the failed IAM theory in olfaction, we precisely measured the non-verbal non-task-dependent sniff response concurrent with pleasant and unpleasant odors in 36 children—18 with ASD and 18 matched typically developing (TD) controls. We found that whereas TD children generated a typical adult-like sniff response within 305 ms of odor onset, ASD children had a profoundly altered sniff response, sniffing equally regardless of odor valance. This difference persisted despite equal reported odor perception and allowed for 81% correct ASD classification based on the sniff response alone (binomial, p < 0.001). Moreover, increasingly aberrant sniffing was associated with increasingly severe ASD (r = −0.75, p < 0.001), specifically with social (r = −0.72, p < 0.001), but not motor (r < −0.38, p > 0.18), impairment. These results uncover a novel ASD marker implying a mechanistic link between the underpinnings of olfaction and ASD and directly linking an impaired IAM with impaired social abilities.

---------------------

Making eye contact without awareness

Marcus Rothkirch et al.
Cognition, October 2015, Pages 108–114

Abstract:
Direct gaze is a potent non-verbal signal that establishes a communicative connection between two individuals, setting the course for further interactions. Although consciously perceived faces with direct gaze have been shown to capture attention, it is unknown whether an attentional preference for these socially meaningful stimuli exists even in the absence of awareness. In two experiments, we recorded participants’ eye movements while they were exposed to faces with direct and averted gaze rendered invisible by interocular suppression. Participants’ inability to correctly guess the occurrence of the faces in a manual forced-choice task demonstrated complete unawareness of the faces. However, eye movements were preferentially directed towards faces with direct compared to averted gaze, indicating a specific sensitivity to others’ gaze directions even without awareness. This oculomotor preference suggests that a rapid and automatic establishment of mutual eye contact constitutes a biological advantage, which could be mediated by fast subcortical pathways in the human brain.

---------------------

Human preferences are biased towards associative information

Sabrina Trapp et al.
Cognition & Emotion, Summer 2015, Pages 1054-1068

Abstract:
There is ample evidence that the brain generates predictions that help interpret sensory input. To build such predictions the brain capitalizes upon learned statistical regularities and associations (e.g., “A” is followed by “B”; “C” appears together with “D”). The centrality of predictions to mental activities gave rise to the hypothesis that associative information with predictive value is perceived as intrinsically valuable. Such value would ensure that this information is proactively searched for, thereby promoting certainty and stability in our environment. We therefore tested here whether, all else being equal, participants would prefer stimuli that contained more rather than less associative information. In Experiments 1 and 2 we used novel, meaningless visual shapes and showed that participants preferred associative shapes over shapes that had not been associated with other shapes during training. In Experiment 3 we used pictures of real-world objects and again demonstrated a preference for stimuli that elicit stronger associations. These results support our proposal that predictive information is affectively tagged, and enhance our understanding of the formation of everyday preferences.

---------------------

The effect of emotional state on taste perception

Corinna Noel & Robin Dando
Appetite, December 2015, Pages 89–95

Abstract:
Taste perception can be modulated by a variety of extraneously applied influences, such as the manipulation of emotion or the application of acute stress. To evaluate the effect of more commonplace day-to-day emotional variation on taste function, taste intensity ratings and hedonic evaluations were collected from approximately 550 attendees following men's hockey games spanning the 2013–2014 season, a period encompassing 4 wins, 3 losses, and 1 tie. Since different outcomes at competitive sporting events are shown to induce varying affective response, this field study presented a unique environment to evaluate the effect of real-life emotional manipulations on our perception of taste, where previous research focused more on extraneous manipulation within a laboratory environment. Analysis revealed that positive emotions correlated with enhanced sweet intensity while negative emotions associated with heightened sour taste. Theoretically, both an increase in sweet and a decrease in sour taste intensity would drive acceptance of a great number of foods. Indeed, hedonic ratings for samples that were less liked (and parenthetically mostly sweet and sour in nature), selectively increased as positive affect grew, possibly due to the perceived decrease in sourness and increase in sweetness. The results of this field study indicate that emotional manipulations in the form of pleasantly or unpleasantly perceived real-life events can influence the intensity perception of taste, driving hedonics for less acceptable foods. These results suggest that such modulation of taste perception could play a role in emotional eating.

---------------------

A Detection Advantage for Facial Threat in the Absence of Anger

Jonathon Shasteen, Noah Sasson & Amy Pinkham
Emotion, forthcoming

Abstract:
Quickly and accurately perceiving the potential for aggression in others is adaptive and beneficial for self-protection. Superior detection of facial threat is demonstrated by studies in which transient threat indices (i.e., angry expressions) are identified more efficiently than are transient approach indices (i.e., happy expressions). Not all signs of facial threat are temporary, however: Persistent, biologically based craniofacial attributes (e.g., low eyebrow ridge) are also associated with a perceived propensity for aggression. It remains unclear whether such static properties of the face elicit comparable attentional biases. We used a novel visual search task of faces for the present study that lacked explicit displays of emotion, but varied on perceived threat via manipulated craniofacial structure. A search advantage for threatening facial elements surfaced, suggesting that efficient detection of threat is not limited to the perception of anger, but rather extends to more latent facial signals of aggressive potential. Although all stimuli were primarily identified as emotionally neutral, thus confirming that the effect does not require emotional content, individual variation in the perception of structurally threatening faces as angry was associated with a greater detection advantage. These results indicate that attributing anger to objectively emotionless faces may serve as a mechanism for their heightened salience and influence important facets of social perception and interaction.

---------------------

Stroke me for longer this touch feels too short: The effect of pleasant touch on temporal perception

Ruth Ogden et al.
Consciousness and Cognition, November 2015, Pages 306–313

Abstract:
Negative, painful, somatosensory stimulation lengthens the perceived duration of time. However, to date, no research has explored the influence of positive, pleasant, somatosensory stimulation on temporal perception. Here we asked whether gentle stroking touch influences perceptions of duration. Pleasant (gentle) and mildly unpleasant (rough) tactile stimulation was delivered whilst participants estimated the duration of a neutral visual stimulus. Pleasant touch resulted in shorter estimates of duration than unpleasant touch. There was no difference in duration perception in the unpleasant and control conditions. Taken together with the results of previous research (Ogden, Moore, Redfern, & McGlone, 2015), the results of this study suggest that pleasant and painful somatosensory stimulation have opposing effects on temporal perception, and additionally that pleasant touch can alter aspects of perceptual and attentional processing outside the purely affective domain.

---------------------

Words Jump-Start Vision: A Label Advantage in Object Recognition

Bastien Boutonnet & Gary Lupyan
Journal of Neuroscience, 24 June 2015, Pages 9329-9335

Abstract:
People use language to shape each other's behavior in highly flexible ways. Effects of language are often assumed to be “high-level” in that, whereas language clearly influences reasoning, decision making, and memory, it does not influence low-level visual processes. Here, we test the prediction that words are able to provide top-down guidance at the very earliest stages of visual processing by acting as powerful categorical cues. We investigated whether visual processing of images of familiar animals and artifacts was enhanced after hearing their name (e.g., “dog”) compared with hearing an equally familiar and unambiguous nonverbal sound (e.g., a dog bark) in 14 English monolingual speakers. Because the relationship between words and their referents is categorical, we expected words to deploy more effective categorical templates, allowing for more rapid visual recognition. By recording EEGs, we were able to determine whether this label advantage stemmed from changes to early visual processing or later semantic decision processes. The results showed that hearing a word affected early visual processes and that this modulation was specific to the named category. An analysis of ERPs showed that the P1 was larger when people were cued by labels compared with equally informative nonverbal cues — an enhancement occurring within 100 ms of image onset, which also predicted behavioral responses occurring almost 500 ms later. Hearing labels modulated the P1 such that it distinguished between target and nontarget images, showing that words rapidly guide early visual processing.

---------------------

Transcranial Direct Current Stimulation of the Motor Cortex Biases Action Choice in a Perceptual Decision Task

Amir-Homayoun Javadi et al.
Journal of Cognitive Neuroscience, forthcoming

Abstract:
One of the multiple interacting systems involved in the selection and execution of voluntary actions is the primary motor cortex (PMC). We aimed to investigate whether the transcranial direct current stimulation (tDCS) of this area can modulate hand choice. A perceptual decision-making task was administered. Participants were asked to classify rectangles with different height-to-width ratios into horizontal and vertical rectangles using their right and left index fingers while their PMC was stimulated either bilaterally or unilaterally. Two experiments were conducted with different stimulation conditions: the first experiment (n = 12) had only one stimulation condition (bilateral stimulation), and the second experiment (n = 45) had three stimulation conditions (bilateral, anodal unilateral, and cathodal unilateral stimulations). The second experiment was designed to confirm the results of the first experiment and to further investigate the effects of anodal and cathodal stimulations alone in the observed effects. Each participant took part in two sessions. The laterality of stimulation was reversed over the two sessions. Our results showed that anodal stimulation of the PMC biases participants' responses toward using the contralateral hand whereas cathodal stimulation biases responses toward the ipsilateral hand. Brain stimulation also modulated the RT of the left hand in all stimulation conditions: Responses were faster when the response bias was in favor of the left hand and slower when the response bias was against it. We propose two possible explanations for these findings: the perceptual bias account (bottom–up effects of stimulation on perception) and the motor-choice bias account (top–down modulation of the decision-making system by facilitation of response in one hand over the other). We conclude that motor responses and the choice of hand can be modulated using tDCS.

By KEVIN LEWIS | 09:00:00 AM

Friday, July 31, 2015

Redressing grievances

Cardinals or Clerics? Congressional Committees and the Distribution of Pork

Christopher Berry & Anthony Fowler
American Journal of Political Science, forthcoming

Abstract:
Journalistic and academic accounts of Congress suggest that important committee positions allow members to procure more federal funds for their constituents, but existing evidence on this topic is limited in scope and has failed to distinguish the effects of committee membership from selection onto committees. We bring together decades of data on federal outlays and congressional committee and subcommittee assignments to provide a comprehensive analysis of committee positions and distributive politics across all policy domains. Using a within-member research design, we find that seats on key committees produce little additional spending. The chairs of the Appropriations subcommittees — the so called “cardinals” of Congress — are an exception to the rule. These leadership positions do generate more funding for constituents, but only from programs under the jurisdiction of their subcommittee. Our results paint a new picture of distributive politics and call for a reexamination of its canonical theories.

---------------------

Congressional Seniority and Pork: A Pig Fat Myth?

Anthony Fowler & Andrew Hall
European Journal of Political Economy, forthcoming

Abstract:
Representatives in American legislatures win reelection at astounding rates, even when they fail to represent the median voter in their districts closely. One popular explanation for this puzzle is that incumbents deliver non-ideological benefits to the district through “pork-barrel politics,” i.e., the distribution of federal spending. We put this explanation to the test by measuring the causal link between senior representation and pork. In short, we find no such link (sausage or otherwise). Employing both differences-in-differences and regression discontinuity designs, we find that a senior member of Congress, on average, brings no more pork to her district than the counterfactual freshman representing the same district at the same time. As a result, voters have no pork-based incentive to reelect their experienced incumbents, and pork-barrel politics cannot explain the incumbency advantage.

---------------------

Drawing Your Senator from a Jar: Term Length and Legislative Behavior

Rocío Titiunik
Political Science Research and Methods, forthcoming

Abstract:
This paper studies the effects of term duration on legislative behavior using field experiments that occur in the Arkansas, Illinois, and Texas Senates in the United States. After mandatory changes in senate district boundaries, state senators are randomly assigned to serve either two-year or four-year terms, providing a rare opportunity to study legislative behavior experimentally. Despite important differences across states, when considered together, the results show that senators serving two years abstain more often, introduce fewer bills, and do not seem to be more responsive to their constituents than senators serving four years. In addition, senators serving shorter terms raise and spend significantly more money, although in those states where funds can be raised continuously during the legislative term, the differences arise only when the election is imminent.

---------------------

Valuing Changes in Political Networks: Evidence from Campaign Contributions to Close Congressional Elections

Pat Akey
Review of Financial Studies, forthcoming

Abstract:
This paper investigates the value of firm political connections using a regression discontinuity design in a sample of close, off-cycle U.S. congressional elections. I compare firms donating to winning candidates and firms donating to losing candidates and find that postelection abnormal equity returns are 3% higher for firms donating to winning candidates. Connections to politicians serving on powerful congressional committees, such as appropriations and taxation, are especially valuable and impact contributing firms sales. Firms' campaign contributions are correlated with other political activities such as lobbying and hiring former government employees, suggesting that firms take coordinated actions to build political networks.

---------------------

Interest Group Influence in Policy Diffusion Networks

Kristin Garrett & Joshua Jansa
State Politics & Policy Quarterly, forthcoming

Abstract:
Scholars have suggested that interest groups affect the diffusion of innovations across states by creating a network of information between the states that aids in the spread of policy ideas. Still, the unique role that interest groups play in policy diffusion networks is not fully understood, in large part because the current methodology for studying diffusion cannot parse out interest group influence. We address this problem by analyzing the actual text of legislation, moving away from binary adoption to a more nuanced measure of policy similarity. This allows us to distinguish whether states emulate other states or interest group model legislation. We use text similarity scores in a social network analysis to explore whether early-adopting states or interest groups are more central to the network. We apply this analytical framework to two policies — abortion insurance coverage restrictions and self-defense statutes. Based on this analysis, we find that a fundamentally different picture of policy diffusion networks begins to emerge — one where interest group model legislation plays a central role in the diffusion of innovations.

---------------------

Acting Right? Privatization, Encompassing Interests, and the Left

Timothy Hicks
Political Science Research and Methods, forthcoming

Abstract:
I present a theoretical account of the politics of privatization that predicts left-wing support for the policy is conditional on the proportionality of the electoral system. In contrast to accounts that see privatization as an inherently right-wing policy, I argue that, like trade policy, it has the feature of creating distributed benefits and concentrated costs. Less proportional electoral systems create incentives for the Left to be responsive to those who face the concentrated costs, and thus for them to oppose privatization more strongly. More proportional systems reduce these incentives and increase the extent to which distributed benefits are internalized by elected representatives. Hypotheses are derived from this theory at both the individual and macro-policy level, and then tested separately. Quantitative evidence on public opinion from the 1990s and privatization revenues from Western European countries over the period 1980–2005 supports the argument.

---------------------

A model of public opinion management

Andrea Patacconi & Nick Vikander
Journal of Public Economics, August 2015, Pages 73–83

Abstract:
Policymakers often motivate their decisions using information collected by government agencies. While more information can help hold the government to account, it may also give policymakers an incentive to meddle with the work of bureaucrats. This paper develops a model of biased information gathering to examine how different disclosure rules and the degree of independence of government agencies affect citizen welfare. Disclosure rules and agency independence interact in subtle ways. We find that secrecy is never optimal and yet insulating the agency from political pressure, so that its information is always unbiased, may also not be socially optimal. A biased information-gathering process can benefit the government by helping it to shape public opinion. But it can also benefit the public, by curbing the government’s tendency to implement its ex ante favored policy, thus mitigating the agency conflict between policymakers and the public.

---------------------

Handicaps to improve reputation

Amihai Glazer
Journal of Theoretical Politics, July 2015, Pages 485-496

Abstract:
An agent may be able to address a task at different times, with the state of nature more favorable to the task in some periods than in others. Success on a task will therefore more greatly improve the agent’s reputation if he is constrained in choosing when to address the task than if he enjoys flexibility in timing. These considerations can explain why presidents emphasize achievements in their first 100 days in office, and why performance of the economy in only some periods of a president’s term affect elections.

---------------------

Oversight Capabilities in the States: Are Professionalized Legislatures Better at Getting What They Want?

Frederick Boehmke & Charles Shipan
State Politics & Policy Quarterly, forthcoming

Abstract:
Once legislators delegate policymaking responsibility to executive agencies, they have the ability to oversee and potentially influence the actions of these agencies. In this article, we examine, first, whether the actions of agencies reflect the preferences of legislators, and second, whether legislative professionalism enhances the ability of legislatures to influence executive agencies and obtain more preferred outcomes. We study these effects in the context of annual nursing home inspections performed by state administrators and make two predictions. First, as Democratic legislators will, on average, prefer a more activist role for government and for government agencies, we should see agencies issue more citations for violations of regulations when state legislatures are Democratic and fewer when they are Republican. Second, as more professionalized legislatures are better able to monitor the agency inspectors’ actions and inspection outcomes, this effect should be intensified for legislatures with greater professionalism. We find support for both arguments: agencies faced with more Democrats in the legislature will be more activist, and this effect is strengthened for more professional legislatures.

---------------------

Staggered Terms for the US Senate: Origins and Irony

Daniel Wirls
Legislative Studies Quarterly, August 2015, Pages 471–497

Abstract:
This article provides the first detailed study of the origins of staggered Senate terms, which typically have been interpreted as part of the framers’ intent to create an insulated, stable, and conservative Senate. I draw upon three sources of evidence — the meaning and application of “rotation” in revolutionary America, the deliberations and decisions at the Constitutional Convention, and the arguments during Ratification — to show that the origins of and intentions behind staggered terms offer little support for the dominant interpretation. Instead, staggered terms, a mechanism to promote “rotation” or turnover of membership, were added to the Constitution as a compromise to offset, not augment, the Senate's longer terms by exposing a legislative chamber with long individual tenure to more frequent electoral influence and change.

---------------------

Interest Groups, Democracy, and Policy Volatility

Jac Heckelman & Bonnie Wilson
Contemporary Economic Policy, forthcoming

Abstract:
Democratic polities appear to produce more stable policy than do autocracies. In this paper, we explore a potential source of the policy stability observed in democracies: special-interest groups. We find that interest groups are associated with greater stability in some measures of policy and that groups mediate the stabilizing impact of democracy on policy. We also find that the impact of interest groups on policy volatility depends on the degree of polarization in a society.

---------------------

Invisible (and Visible) Lobbying: The Case of State Regulatory Policymaking

Susan Webb Yackee
State Politics & Policy Quarterly, forthcoming

Abstract:
Most lobbying is invisible, meaning that interest groups routinely contact government officials “off the public record.” While such lobbying is ubiquitous, whether and how it may affect public policy decision-making remains largely unknown. I theorize that lobbying that employs both invisible and visible tactics is the most influential. I study the development of 38 health-related regulatory policies in Wisconsin to assess this argument. I employ government records, survey data from more than 350 individuals, and interviews with 15 state policymakers. I find that invisible and visible lobbying — when performed in combination — are associated with greater regulatory policy change. From a normative perspective, these results are both reassuring and troubling. On one hand, the results suggest that invisible lobbying, on its own, rarely drives state regulatory policy shifts. Yet, on the other hand, those interested parties with the resources necessary to lobby across multiple modes are more likely to see policy change.

---------------------

Partisan Presidential Influence over US Federal Budgetary Outcomes: Evidence from a Stochastic Decomposition of Executive Budget Proposals

George Krause & Ian Palmer Cook
Political Science Research and Methods, May 2015, Pages 243-264

Abstract:
Can American presidents use their budget proposal authority to achieve their own partisan policy priorities? This is an important, yet challenging, question to answer since formal executive authority is ambiguous, and budgetary powers are shared in the US separation of powers system. Indeed, the question remains open since prior empirical designs conflate external constraints (arising from political and policy conditions) with those that reflect executive partisan policy priorities. This study advances a novel stochastic decomposition of executive budget proposals in order to analyze the extent to which presidents can shape the legislative funding of US federal agencies consistent with their own partisan policy priorities. Statistical evidence reveals that presidents exert partisan-based budgetary influence over appropriations that cannot be ascertained from previous empirical studies that rely on either the observed gap between presidential requests and congressional appropriations or standard instrumental variable estimation methods. The statistical evidence also indicates that presidents are marginally more effective at converting their partisan policy priorities into budgetary outcomes under divided party government. Contrary to theoretical predictions generated from bilateral veto bargaining models, presidents are also shown to exert effective partisan budgetary influence even when their budget requests exceed congressional appropriations.

---------------------

Representative Bureaucracy and the Willingness to Coproduce: An Experimental Study

Norma Riccucci, Gregg Van Ryzin & Huafang Li
Public Administration Review, forthcoming

Abstract:
Relying on the theory of representative bureaucracy — specifically, the notion of symbolic representation — this article examines whether varying the number of female public officials overseeing a local recycling program influences citizens’ (especially women's) willingness to cooperate with the government by recycling, thus coproducing important policy outcomes. Using a survey experiment in which the first names of public officials are manipulated, the authors find a clear pattern of increasing willingness on the part of women to coproduce when female names are more represented in the agency responsible for recycling, particularly with respect to the more difficult task of composting food waste. Overall, men in the experiment were less willing to coproduce across all measures and less responsive to the gender balance of names. These findings have important implications for the theory of representative bureaucracy and for efforts to promote the coproduction of public services.

---------------------

A Legislature or a Legislator Like Me? Citizen Demand for Collective and Dyadic Political Representation

Jeffrey Harden & Christopher Clark
American Politics Research, forthcoming

Abstract:
American politics scholars have long distinguished between legislature-level “collective” and legislator-level “dyadic” representation. However, most research on these concepts focuses on elite-level outcomes (e.g., policy output or roll-call behavior), and whether one or both forms leads to the representation of citizen interests. Less is known about the demand side of the relationship — whether constituents prefer collective or dyadic representation. Yet the citizen perspective is critical to both scholarly and normative discussions of representation. Through a novel survey experiment administered to national samples of Americans, we examine citizen preferences for collective and dyadic representation with respect to two important social identities: race and political partisanship. We posit that citizens prefer collective over dyadic representation because collective representation provides better representation of constituents’ interests via substantive and symbolic benefits. We show results that support this expectation, and then conclude by discussing the implications for scholarly and normative understandings of representation in American politics.

---------------------

Failures: Diffusion, Learning, and Policy Abandonment

Craig Volden
State Politics & Policy Quarterly, forthcoming

Abstract:
Studies of the diffusion of policies tend to focus on innovations that successfully spread across governments. Implicit in such diffusion is the abandonment of the previous policy. Yet little is known about whether governments abandon policies that have failed elsewhere, as would be consistent with states acting as policy laboratories not only for policy successes but also for failures. This article focuses on the possible abandonment of failing welfare-to-work policies in the formative years (1997–2002) of the Temporary Assistance for Needy Families (TANF) program across the 50 U.S. states. Using a dyad-based event history analysis, I find that, if both states in a pairing have a policy and one state’s policy fails (in employing welfare recipients, reducing welfare rolls, or reducing overall poverty rates), then the other state is much more likely to abandon that failing policy. Moreover, such learning from the other state’s experience is more common when the states are ideologically similar to one another and when the legislature in the potentially learning state is more professional.

---------------------

How Institutions Affect Gender Gaps in Public Opinion Expression

Lilach Nir & Scott McClurg
Public Opinion Quarterly, Summer 2015, Pages 544-567

Abstract:
The expression of opinions in ordinary political discussions between citizens is essential to public opinion dynamics such as opinion leadership, false consensus, or pluralistic ignorance. One of the main predictors of expressiveness in citizens’ discussions is gender. Although research documents consistent gaps between men’s and women’s expressiveness through political discussion, most insights are based on the United States. Absent a comparative perspective, little consideration has been given to major differences across countries in men’s and women’s access to various institutions, and whether this access correlates with gender gaps in discursive expression. Access affects opportunities of women and men to encounter politically relevant information and connect with potential discussants. The present article tests whether greater egalitarianism in political representation, education, and workforce participation reduces gender gaps in political discussion. Multilevel analyses of the International Social Survey Program data set (approximately N = 36,600; 33 countries) show that several country-level features affect the contribution of gender to political discussion, but in ways that suggest a trade-off between gender equality and opinion expressiveness.

By KEVIN LEWIS | 09:00:00 AM

Thursday, July 30, 2015

Salt of the earth

Secularization and Long-Run Economic Growth

Holger Strulik
Economic Inquiry, forthcoming

Abstract:
This paper integrates a simple theory of identity choice into a framework of endogenous economic growth to explain how secularization can be both cause and consequence of economic development. A secular identity allows an individual to derive more pleasure from consumption than religious individuals, leading secular individuals to work harder and to save more in order to experience this pleasure from consumption. These activities are conducive to economic growth. Higher income makes consumption more affordable and increases the appeal of a secular identity for the next generation. An extension of the basic model investigates the Protestant Reformation as an intermediate stage during the take-off to growth. Another extension introduces intergenerationally dependent religious preferences and demonstrates how a social multiplier amplifies the speed of secularization.

---------------------

The Natural Environment as a Spiritual Resource: A Theory of Regional Variation in Religious Adherence

Todd Ferguson & Jeffrey Tamburello
Sociology of Religion, forthcoming

Abstract:
A region's natural environment has profound social effects for an area. Previous work has connected the environment to tourism, migration rates, community attachment, and economic outcomes. In this article, we explore how nature may impact the religious structuring of a region. Specifically, we investigate if beautiful landscapes and good weather — what scholars call “natural amenities” — could be spiritual resources used by the population to connect with the sacred. We hypothesize that the environment, as a spiritual resource, would compete with more traditional religious organizations. Thus, we expect that regions with higher levels of natural amenities would experience lower rates of religious adherence. To test our hypothesis, we use spatial econometric modeling techniques to analyze data from the Religious Congregations and Membership Study, United States Department of Agriculture, the U.S. County Business Patterns, and the Census. Results show that counties with higher levels of natural amenities have lower rates of adherence to traditional religious organizations.

---------------------

On the Norms of Charitable Giving in Islam: Two Field Experiments in Morocco

Fatima Lambarraa & Gerhard Riener
Journal of Economic Behavior & Organization, forthcoming

Abstract:
Charitable giving is one of the major obligations in Islam and a strong Muslim norm endorses giving to the needy, but discourages public displays of giving. We report the results two field experiments with 534 and 200 participants at Moroccan educational institutions to assess the effects of this moral prescription on actual giving levels in anonymous and public settings. Subjects who participated in a paid study were given the option to donate from their payment to a local orphanage, under treatments that varied the publicity of the donation and the salience of Islamic values using either Arabic or French instructions. In the salient Islamic treatment, anonymity of donations significantly increased donation incidence from 59% to 77% percent as well as average donations for religious subjects from 8.90 to 13.00 Dh out of possibly 30 Dh. These findings stand in stark contrast to most previous findings in the charitable giving literature and suggest to reconsider potential fundraising strategies in Muslim populations.

---------------------

Modern Marital Practices and the Growth of World Christianity During the Mid-Twentieth Century

Anneke Stasson
Church History, June 2015, Pages 394-420

Abstract:
Studies concerned with modernity, mission Christianity, and sexuality generally address how western, Christian gender ideologies have affected women or how they have affected modernization. This article approaches the nexus of modernity, Christianity, and sexuality from a different angle. One of the notable consequences of modernization was that young people in industrializing nations began demanding the right to choose their own spouse and marry for love. Several scholars have noted the connection between modernization and spouse self-selection, but none have explored the relationship between Christianity's endorsement of spouse self-selection and its global appeal during the mid-twentieth century. This article examines a collection of letters written by young Africans to missionary Walter Trobisch after reading his popular 1962 book, I Loved a Girl. These letters suggest that Christianity's endorsement of spouse self-selection and marrying for love gave it a kind of modern appeal for young people who were eagerly adopting the modern values of individualism and self-fulfillment. The practice of prayer provided relief to young people who were struggling to navigate the unfamiliar realm of dating in the modern world.

---------------------

Are You There God? It’s Me, a College Student: Religious Beliefs and Higher Education

Wesley Routon & Jay Walker
B.E. Journal of Economic Analysis & Policy, forthcoming

Abstract:
Drawing data from a longitudinal survey of college students from 514 institutions of higher education, we add to the discussion on the education–religion puzzle by providing information on specifically which college students experience the most religiosity change, investigating multiple change measures (conviction strength, service attendance, and religious identity), and estimating which programs of study and collegiate experiences cause the most change. We also provide an analysis of students who seek or initially sought an occupation within the clergy. Among our findings, 56% of students report changes in the strength of their religious convictions during college, while 45% report changes in religious service attendance frequency. Of those who matriculate as religious, about 9% lose their religion by graduation. Of those who matriculate with no religious identity, an impressive 33% graduate with one. Choice of institution, major of study, academic success, and many other collegiate experiences are shown to be determinants of these changes.

---------------------

Religion, Age, and Crime: Do Religious Traditions Differentially Impact Juvenile Versus Adult Violence?

Casey Harris et al.
Sociological Spectrum, July/August 2015, Pages 372-391

Abstract:
A growing body of empirical research demonstrates that the relative presence of religious adherents at the community-level has important relationships with rates of crime and violence. Less understood is how adherence to specific religious traditions (e.g., evangelical Protestant, Catholic, mainline Protestant) is associated with rates of crime, especially across particular age groups toward which religious traditions devote varying degrees of structural and cultural resources. Using data from the Religious Congregations and Membership Survey and age-specific arrest data from the Uniform Crime Reporting program in 2010, the current study finds that the impact of religious adherence on crime varies by religious tradition and across juvenile versus adult crime. Specifically, evangelical Protestant adherence is negatively associated with juvenile but not adult violence, while Catholic adherence is associated with reduced adult but not juvenile violence, net of controls. Implications for research on religious contexts and crime, as well as policy, are discussed.

---------------------

The Persistent Effects of in Utero Nutrition Shocks Over the Life Cycle: Evidence From Ramadan Fasting

Muhammad Farhan Majid
Journal of Development Economics, November 2015, Pages 48–57

Abstract:
More than a billion Muslims living today were potentially exposed to their mother’s fasting in utero. This paper uses the Indonesian Family Life Survey to study the persistent effects of in utero exposure to Ramadan over the life cycle. The exposed children perform more child labor, score 7.4 percent lower on cognitive tests and 8.4 percent lower on math test scores. As adults, the exposed children work 4.7 percent fewer hours per week and are more likely to be self-employed. Estimates are robust to the inclusion of family fixed effects, particularly for hours worked and test scores. Moreover, results are strongest for religious Muslim families, while insignificant for non-Muslims. Back of the envelope calculations reveal an implied fasting rate of 68%-82% among pregnant Muslim women.

---------------------

Religion, Self-Rated Health, and Mortality: Whether Religiosity Delays Death Depends on the Cultural Context

Olga Stavrova
Social Psychological and Personality Science, forthcoming

Abstract:
Existing research, mostly based on the data from the United States, suggests that religiosity contributes to better health and longevity. This article explores the association between religiosity and self-rated health across 59 countries and shows that the positive association between religiosity and self-rated health is an exception found in a relatively small number of countries. Consistent with the person–culture fit literature, Study 1 shows that in countries in which religiosity represents a social norm (i.e., it is common and socially desirable), religious individuals report better subjective health than nonreligious individuals. Study 2 demonstrates that even within the United States, the association of religiosity with self-rated health as well as with reduced mortality largely depends on the regional level of religiosity, suggesting that the health and longevity benefits of religiosity are restricted to highly religious regions.

---------------------

Public perceptions of future threats to humanity and different societal responses: A cross-national study

Melanie Randle & Richard Eckersley
Futures, forthcoming

Abstract:
There is growing scientific evidence that humanity faces a number of threats that jeopardize its future. Public perceptions of these threats, both their risks and reactions to them, are important in determining how humanity confronts and addresses the threats. This study investigated the perceived probability of threats to humanity and different responses to them (nihilism, fundamentalism and activism), in four Western nations: the US, UK, Canada and Australia. Overall, a majority (54%) rated the risk of our way of life ending within the next 100 years at 50% or greater, and a quarter (24%) rated the risk of humans being wiped out at 50% or greater. The responses were relatively uniform across countries, age groups, gender and education level, although statistically significant differences exist. Almost 80% agreed “we need to transform our worldview and way of life if we are to create a better future for the world” (activism). About a half agreed that “the world's future looks grim so we have to focus on looking after ourselves and those we love” (nihilism), and over a third that “we are facing a final conflict between good and evil in the world” (fundamentalism). The findings offer insight into the willingness of humanity to respond to the challenges identified by scientists and warrant increased consideration in scientific and political debate.

---------------------

Kissing the Mezuzah and Cognitive Performance: Is There an Observable Benefit?

Erez Siniver & Gideon Yaniv
Journal of Economic Behavior & Organization, September 2015, Pages 40–46

Abstract:
A mezuzah is a small case affixed to the doorframe of each room in Jewish homes and workplaces which contains a tiny scroll of parchment inscribed with a prayer. It is customary for religious Jews to touch the mezuzah every time they pass through a door and kiss the fingers that touched it. However, kissing the mezuzah has also become customary for many secular Jews who think of the mezuzah as a good luck charm. In view of a recent revelation that kissing the mezuzah entails a health hazard, the present paper inquires whether it also has some observable benefit. In an experiment conducted among non-religious mezuzah-kissing economics and business students confronted with a logic-problem exam, some were allowed to kiss the mezuzah before taking the exam, whereas the others were asked not to do so or could not do so because it had been removed from the room doorframe. The experiment revealed that participants who did not kiss the mezuzah performed worse than those who kissed it, and that the stronger is one's belief in the mezuzah's luck-enhancing properties, the better he performs when he kisses it but the worse he performs when he does not.

---------------------

The Effects of Religious Priming and Persuasion Style on Decision-Making in a Resource Allocation Task

Brandt Smith & Michael Zárate
Journal of Peace Psychology, forthcoming

Abstract:
The present research examined the effects of religious priming and charismatic leadership on decision-making in a resource allocation task. Religious priming took the form of having participants write 1 to 2 paragraphs about the importance of religion in the formation of social values. Confederates were trained to behave in either a charismatic or noncharismatic manner. After being primed with religion, participants were more compliant with a confederate leader and allocated more funds to hydro-fracture mining instead of a solar energy research project. Further, participants were more likely to comply with the confederate when they were first primed with religion. Implications of this study and future directions are discussed.

---------------------

Should Science Class Be Fair? Frames and Values in the Evolution Debate

Thomas Nelson, Dana Wittmer & Dustin Carnahan
Political Communication, forthcoming

Abstract:
Communicators try to shape public opinion to their advantage by invoking social values. We examine a vivid example of this value framing in the debate over teaching evolution in the public schools. Supporters of intelligent design (ID) theory have pressed for greater acceptance in public schools by framing the issue as a question of fairness. A survey experiment revealed overwhelming agreement that including ID in science class is fairer than excluding it. This belief had a greater impact on tolerance for ID when the issue was framed with respect to fairness. A second study showed similar effects from a pro-ID documentary film. A final study showed that training in scientific reasoning counteracts the impact of the fairness value, thereby decreasing tolerance for ID. Combined, these studies show how political debate can be understood as a contest over which values deserve greatest consideration or emphasis.

---------------------

Override the controversy: Analytic thinking predicts endorsement of evolution

Will Gervais
Cognition, September 2015, Pages 312–321

Abstract:
Despite overwhelming scientific consensus, popular opinions regarding evolution are starkly divided. In the USA, for example, nearly one in three adults espouse a literal and recent divine creation account of human origins. Plausibly, resistance to scientific conclusions regarding the origins of species — like much resistance to other scientific conclusions (Bloom & Weisberg, 2007) — gains support from reliably developing intuitions. Intuitions about essentialism, teleology, agency, and order may combine to make creationism potentially more cognitively attractive than evolutionary concepts. However, dual process approaches to cognition recognize that people can often analytically override their intuitions. Two large studies (total N = 1324) found consistent evidence that a tendency to engage analytic thinking predicted endorsement of evolution, even controlling for relevant demographic, attitudinal, and religious variables. Meanwhile, exposure to religion predicted reduced endorsement of evolution. Cognitive style is one factor among many affecting opinions on the origin of species.

---------------------

Costly Signaling Increases Trust, Even Across Religious Affiliations

Deborah Hall et al.
Psychological Science, forthcoming

Abstract:
Trust is a critical aspect of social interaction. One might predict that individuals trust religious out-groups less than religious in-groups, and that costly signals performed by members of religious in-groups increase trust while costly signals performed by members of religious out-groups decrease trust. We examined how Christian participants perceived the trustworthiness of Muslim and Christian individuals who did or did not engage in religious costly signaling. Religious costly signaling, operationalized as giving to religious charities (Experiments 1 and 2) or adhering to religious dietary restrictions (Experiment 3), increased self-reported trust, regardless of target religious affiliation. Furthermore, when estimating the likelihood that trustworthy versus untrustworthy targets engaged in costly signaling, participants made systematic judgments that showed that costly signaling is associated with trust for both Muslim and Christian targets (Experiment 4). These results are novel in their suggestion that costly signals of religious commitment can increase trust both within and, crucially, across religious-group lines.

---------------------

Christian Nationalism, Racial Separatism, and Family Formation: Attitudes Toward Transracial Adoption as a Test Case

Samuel Perry & Andrew Whitehead
Race and Social Problems, June 2015, Pages 123-134

Abstract:
Christian nationalism seeks the preservation or restoration of a supposed religio-national purity. We argue that, within the racialized social system of the United States, this idealized religio-national purity is inextricably linked with notions of ethno-racial purity. Focusing on interracial families as a violation of ethno-racial purity, we theorize that adherents to Christian nationalism will be less supportive of family formations in which ethno-racial purity is formally transgressed. We demonstrate this by examining the impact of Christian nationalism on Americans’ views toward transracial adoption (TRA). Americans’ attitudes toward TRA provide an interesting test case in that, unlike attitudes toward racial exogamy, TRA implies no biological or cultural race-mixing between social peers, but only a socio-legal guardianship across races. Opposition to TRA thus taps Americans’ attitudes about the “ideal” ethno-racial composition of families socially and legally, rather than their beliefs about the biological or cultural incompatibility of ethno-racial groups. Analyzing national survey data, we find that adherence to Christian nationalism is strongly and negatively associated with support for TRA, net of relevant controls. We demonstrate that the influence of Christian nationalism is robust and independent of respondents’ trust of other races and their religious commitment, both that are strongly and positively associated with support for TRA. Findings affirm that Christian nationalism implies ethno-racial separation and purity, and thus, we propose that a resurgence of Christian nationalist ideology in the public sphere may serve to reinforce racial boundaries and exclusion in other realms of American social life.

---------------------

Attributes of God: Conceptual Foundations of a Foundational Belief

Andrew Shtulman & Marjaana Lindeman
Cognitive Science, forthcoming

Abstract:
Anthropomorphism, or the attribution of human properties to nonhuman entities, is often posited as an explanation for the origin and nature of God concepts, but it remains unclear which human properties we tend to attribute to God and under what conditions. In three studies, participants decided whether two types of human properties — psychological (mind-dependent) properties and physiological (body-dependent) properties — could or could not be attributed to God. In Study 1 (n = 1,525), participants made significantly more psychological attributions than physiological attributions, and the frequency of those attributions was correlated both with participants’ religiosity and with their attribution of abstract, theological properties. In Study 2 (n = 99) and Study 3 (n = 138), participants not only showed the same preference for psychological properties but were also significantly faster, more consistent, and more confident when attributing psychological properties to God than when attributing physiological properties. And when denying properties to God, they showed the reverse pattern — that is, they were slower, less consistent, and less confident when denying psychological properties than when denying physiological properties. These patterns were observed both in a predominantly Christian population (Study 2) and a predominantly Hindu population (Study 3). Overall, we argue that God is conceptualized not as a person in general but as an agent in particular, attributed a mind by default but attributed a body only upon further consideration.

By KEVIN LEWIS | 09:00:00 AM

Wednesday, July 29, 2015

Satisfied customers

Do ratings of firms converge? Implications for managers, investors and strategy researchers

Aaron Chatterji et al.
Strategic Management Journal, forthcoming

Abstract:
Raters of firms play an important role in assessing domains ranging from sustainability to corporate governance to best places to work. Managers, investors, and scholars increasingly rely on these ratings to make strategic decisions, invest trillions of dollars in capital and study corporate social responsibility (CSR), guided by the implicit assumption that the ratings are valid. We document the surprising lack of agreement across social ratings from six well-established raters. These differences remain even when we adjust for explicit differences in the definition of CSR held by different raters, implying the ratings have low validity. Our results suggest that users of social ratings should exercise caution in interpreting their connection to actual CSR and that raters should conduct regular evaluations of their ratings.

---------------------

Paying Up for Fair Pay: Consumers Prefer Firms with Lower CEO-to-Worker Pay Ratios

Bhavya Mohan, Michael Norton & Rohit Deshpande
Harvard Working Paper, May 2015

Abstract:
Prior research examining consumer expectations of equity and price fairness has not addressed wage fairness, as measured by a firm's pay ratio. Pending legislation will require American public companies to disclose the pay ratio of CEO wage to the average employee's wage. Our six studies show that pay ratio disclosure affects purchase intention of consumers via perceptions of wage fairness. The disclosure of a retailer's high pay ratio (e.g., 1000 to 1) reduces purchase intention relative to firms with lower ratios (e.g., 5 to 1 or 60 to 1, Studies 1A, 1B, and 1C). Lower pay ratios improve consumer perceptions across a range of products at different price points (Study 2A and 2B), increase consumer ratings of both firm warmth and firm competence (Study 3), and enhance perceptions of Democrats and Independents without alienating Republican consumers (Study 4). A firm with a high ratio must offer a 50% price discount to garner as favorable consumer impressions as a firm that charges full price but features a lower ratio (Study 5).

---------------------

A taste for temperance: How American beer got to be so bland

Ranjit Dighe
Business History, forthcoming

Abstract:
This article examines the historical origins of bland American beer. The US was not strongly associated with a particular beer type until German immigrants popularised lager beer. Lager, refreshing and mildly intoxicating, met the demands of America's growing working class. Over time, American lager became lighter and blander. This article emphasises America's uncommonly strong temperance movement, which put the industry on the defensive. Brewers pushed their product as 'the beverage of moderation,' and consumers sought out light, relatively non-intoxicating beers. The recent 'craft beer revolution' is explained as a backlash aided by a changing consumer culture and improved information technology.

---------------------

Do Sex and Violence Sell? A Meta-Analytic Review of the Effects of Sexual and Violent Media and Ad Content on Memory, Attitudes, and Buying Intentions

Robert Lull & Brad Bushman
Psychological Bulletin, forthcoming

Abstract:
It is commonly assumed that sex and violence sell. However, we predicted that sex and violence would have the opposite effect. We based our predictions on the evolution and emotional arousal theoretical framework, which states that people are evolutionarily predisposed to attend to emotionally arousing cues such as sex and violence. Thus, sexual and violent cues demand more cognitive resources than nonsexual and nonviolent cues. Using this framework, we meta-analyzed the effects of sexual media, violent media, sexual ads, and violent ads on the advertising outcomes of brand memory, brand attitudes, and buying intentions. The meta-analysis included 53 experiments involving 8,489 participants. Analyses found that brands advertised in violent media content were remembered less often, evaluated less favorably, and less likely to be purchased than brands advertised in nonviolent, nonsexual media. Brands advertised using sexual ads were evaluated less favorably than brands advertised using nonviolent, nonsexual ads. There were no significant effects of sexual media on memory or buying intentions. There were no significant effects of sexual or violent ads on memory or buying intentions. As intensity of sexual ad content increased, memory, attitudes, and buying intentions decreased. When media content and ad content were congruent (e.g., violent ad in a violent program), memory improved and buying intentions increased. Violence and sex never helped and often hurt ad effectiveness. These results support the evolution and emotional arousal framework. Thus, advertisers should consider the effects of media content, ad content, content intensity, and congruity to design and place more effective ads.

---------------------

Marketing Department Power and Firm Performance

Hui Feng, Neil Morgan & Lopo Rego
Journal of Marketing, forthcoming

Abstract:
This study empirically investigates marketing department power within U.S. firms over the 1993-2008 period and assesses its impact on firm performance. Using a new objective measure of marketing department power and a cross-industry sample of 612 public firms in the U.S., results reveal that marketing department power generally increased over this time period. Further, our analyses show that a powerful marketing department enhances firms' longer-term future Total Shareholder Returns (TSR) above and beyond its positive effect on firms' short-term Return on Assets (ROA). The findings also reveal that a firm's long run market-based asset building and short run market-based asset leveraging capabilities partially mediate the effect of a firm's marketing department power on its longer-term shareholder value performance, and fully mediate the effect on its short-term ROA performance. This research provides new insights for marketing scholars and managers concerning marketing's influence within the firm and how investments in building a powerful marketing department impact firm performance.

---------------------

Corporate social responsibility and the cost of corporate bonds

Wenxia Ge & Mingzhi Liu
Journal of Accounting and Public Policy, forthcoming

Abstract:
This study examines how a firm's corporate social responsibility (CSR) performance is associated with the cost of its new bond issues. Using credit ratings as an ex ante cost of debt, we find that better CSR performance is associated with better credit ratings. After controlling for credit ratings, our results show that better CSR performance is associated with lower yield spreads but some of the effect is absorbed by credit ratings. When we examine CSR strengths and concerns separately, we find that a higher CSR strength (concern) score is associated with lower (higher) yield spreads. Our results on the effect of firm performance on seven individual CSR dimensions are generally consistent with our main findings. Our results indicate that firms with better CSR performance are able to issue bonds at lower cost and that both CSR strengths and concerns are considered by bondholders. Additional subsample test results suggest that the association between CSR performance and bond yield spreads is more pronounced in investment-grade and non-Rule 144a bonds, for financially healthier bond issuers, for issuers with weaker corporate governance and higher information asymmetry, and for issuers operating in environmentally sensitive industries.

---------------------

To Do or To Have, Now or Later? The Preferred Consumption Profiles of Material and Experiential Purchases

Amit Kumar & Thomas Gilovich
Journal of Consumer Psychology, forthcoming

Abstract:
Extending previous research on the hedonic benefits of spending money on doing rather than having, this paper investigates when people prefer to consume experiential and material purchases. We contend that the preferred timing of consumption tends to be more immediate for things (like clothing and gadgets) than for experiences (like vacations and meals out). First, we examine whether consumers exhibit a stronger preference to delay consumption of experiential purchases compared to material goods. When asked to make choices about their optimal consumption times, people exhibit a relative preference to have now and do later. In the next set of studies, we found that this difference in preferred consumption led participants to opt for a lesser material item now over a superior item later, but to wait for a superior experiential purchase rather than settle for a lesser experience now. This tendency is due to the fact that consumers derive more utility from waiting for experiences than from waiting for possessions. Finally, we provide evidence that these preferences affect people's real-world decisions about when to consume.

---------------------

Halo (Spillover) Effects in Social Media: Do Product Recalls of One Brand Hurt or Help Rival Brands?

Abhishek Borah & Gerard Tellis
Journal of Marketing Research, forthcoming

Abstract:
Online chatter is important because it is spontaneous, passionate, information rich, granular, and live. Thus, it can forewarn and be diagnostic about potential problems with automobile models, known as nameplates. The authors define perverse halo (or negative spillover) as the phenomenon whereby negative chatter about one nameplate increases negative chatter for another nameplate. The authors test the existence of such perverse halo for 48 nameplates from 4 different brands during a series of automobile recalls. The analysis is by individual and panel Vector AutoRegressive models. Perverse halo is extensive. It occurs for nameplates within the same brand across segments and across brands within segments. It is strongest between brands of the same country. Perverse halo is asymmetric, being stronger from a dominant brand to a less dominant brand than vice versa. Apology advertising about recalls has harmful effects on both the recalled brand and its rivals. Further, these halo effects impact downstream performance metrics such as sales and stock market performance. Online chatter amplifies the negative effect of recalls on downstream sales by about 4.5 times.

---------------------

The Unfavorable Economics of Measuring the Returns to Advertising

Randall Lewis & Justin Rao
Quarterly Journal of Economics, forthcoming

Abstract:
Twenty-five large field experiments with major U.S. retailers and brokerages, most reaching millions of customers and collectively representing $2.8 million in digital advertising expenditure, reveal that measuring the returns to advertising is difficult. The median confidence interval on return on investment is over one-hundred percentage points wide. Detailed sales data show that, relative to the per capita cost of the advertising, individual-level sales are very volatile; a coefficient of variation of ten is common. Hence, informative advertising experiments can easily require more than ten million person-weeks, making experiments costly and potentially infeasible for many firms. Despite these unfavorable economics, randomized control trials represent progress by injecting new, unbiased information into the market. The inference challenges revealed in the field experiments also show that selection bias, due to the targeted nature of advertising, is a crippling concern for widely-employed observational methods.

---------------------

The Informational Role of Product Trade-Ins for Pricing Durable Goods

Ohjin Kwon et al.
Journal of Industrial Economics, forthcoming

Abstract:
This research theorizes that sellers of durable goods can utilize inferences about the buyer's willingness to pay based not only on her decision to trade in the old good but also on its characteristics. We find empirical support for this theory using transaction data for new car purchases. The results support the notion that dealers infer a higher willingness to pay and charge higher prices to consumers who trade in a used vehicle than to those who do not. We also find that dealers charge even higher prices to those consumers who trade in used cars that are similar to the new one.

---------------------

From Finance to Marketing: Impact of Financial Leverage on Customer Satisfaction

Ashwin Malshe & Manoj Agarwal
Journal of Marketing, forthcoming

Abstract:
The authors study how a firm's financial leverage affects marketing outcomes and consequent firm value. They find that leverage has a dual effect - it reduces customer satisfaction and moderates the relationship between satisfaction and firm value. Due to the burden of making regular interest payments to debt holders, managers face pressure to generate adequate cash flows. The authors theorize that this may lead marketers to adopt short-term actions such as cutting advertising and R&D spending, which can hurt customer satisfaction by lowering perceived quality and perceived value. Further, higher leverage reduces financial flexibility by constraining marketers from exploiting growth opportunities resulting from higher customer satisfaction. The authors empirically show that leverage leads to lower customer satisfaction with advertising intensity mediating this effect. The negative impact of leverage on satisfaction is more pronounced for service firms and firms in competitive markets. Finally, leverage negatively moderates the customer satisfaction-firm value link. Increases in customer satisfaction are value enhancing at modest levels of leverage, but at very high levels of leverage, increases in satisfaction are value-reducing.

---------------------

Cost Conscious? The Neural and Behavioral Impact of Price Primacy on Decision Making

Uma Karmarkar, Baba Shiv & Brian Knutson
Journal of Marketing Research, forthcoming

Abstract:
Price is a key factor in most purchases, but it can be presented at different stages of decision making. The authors examine the sequence-dependent effects of price and product information on the decision-making process at both neural and behavioral levels. During functional magnetic resonance imaging, the price of a product was shown to participants either before or after the product itself was presented. Early exposure to price, or "price primacy," altered the process of valuation, as observed in altered patterns of activity in the medial prefrontal cortex immediately before making a purchase decision. Specifically, whereas viewing products first resulted in evaluations strongly related to products' attractiveness or desirability, viewing prices first appeared to promote overall evaluations related to products' monetary worth. Consistent with this framework, the authors show that price primacy can increase purchase of bargain-priced products when their worth is easily recognized. Together, these results suggest that price primacy highlights considerations of product worth and can thereby influence purchasing.

---------------------

Saying No to the Glow: When Consumers Avoid Arrogant Brands

Nira Munichor & Yael Steinhart
Journal of Consumer Psychology, forthcoming

Abstract:
Arrogant brands have a multifaceted influence on consumers: Although consumers appreciate arrogant brands as reflecting high status and quality, arrogance can also make consumers feel inferior. Consumers whose self is a priori threatened may consequently "say no to the glow" and avoid arrogant brands. Results from six experiments using fictitious or actual arrogant brands show that when consumers experience prior self-threat, they may avoid brands that convey arrogance in favor of a competing, less-arrogant alternative. Such avoidance helps self-threatened consumers restore their self-perceptions and feel better about themselves.

---------------------

Using EEG to Predict Consumers' Future Choices

Ariel Telpaz, Ryan Webb & Dino Levy
Journal of Marketing Research, forthcoming

Abstract:
It is well established that neural imaging technology can predict preferences for consumer products. However, the applicability of this method to consumer marketing research remains uncertain, partly because of the expense required. In this article, the authors demonstrate that neural measurements made with a relatively low-cost and widely available measurement method - electroencephalography (EEG) - can predict future choices of consumer products. In the experiment, participants viewed individual consumer products in isolation, without making any actual choices, while their neural activity was measured with EEG. At the end of the experiment, participants were offered choices between pairs of the same products. The authors find that neural activity measured from a midfrontal electrode displays an increase in the N200 component and a weaker theta band power that correlates with a more preferred product. Using recent techniques for relating neural measurements to choice prediction, they demonstrate that these measures predict subsequent choices. Moreover, the accuracy of prediction depends on both the ordinal and cardinal distance of the EEG data; the larger the difference in EEG activity between two products, the better the predictive accuracy.

By KEVIN LEWIS | 09:00:00 AM

Tuesday, July 28, 2015

License and registration

Divorce and the Birth Control Pill in the US, 1950–85

Miriam Marcén
Feminist Economics, forthcoming

Abstract:
This paper explores the relationship between the advent of the birth control pill and divorce rates. Women using the pill can decide when and whether to have children and whether to maintain their attachment to the labor force. This ability may increase women's autonomy, making divorce more feasible. The pill's effects are identified through a quasi-experiment exploiting differences in the language of the Comstock anti-obscenity statutes approved in the late 1800s and early 1900s in the United States. Empirical evidence from state-level data on US divorce rates 1950 to 1985 shows that sales bans of oral contraceptives have a negative impact on divorce. These findings are robust to alternative specifications and controls for observed (such as women's labor force participation) and unobserved state-specific factors, and time-varying factors at the state level. Results suggest that the impact of women's control of hormonal contraception on their autonomy is important in divorce decisions.

---------------------

Close Relationships and Self-Regulation: How Relationship Satisfaction Facilitates Momentary Goal Pursuit

Wilhelm Hofmann, Eli Finkel & Gráinne Fitzsimons
Journal of Personality and Social Psychology, forthcoming

Abstract:
In the new millennium, scholars have built a robust intersection between close-relationships research and self-regulation research. However, virtually no work has investigated how the most basic and broad indicator of relationship quality, relationship satisfaction, affects self-regulation and vice versa. In the present research, we show that higher relationship satisfaction promotes a motivational mind-set that is conducive for effective self-regulation, and thus for goal progress and performance. In Study 1 — a large-scale, intensive experience sampling project of 115 couples (total N = 230) — we closely tracked fluctuations in state relationship satisfaction (SRS) and 4 parameters of effective self-regulation according to our conceptual model. Dyadic process analyses showed that individuals experiencing higher SRS than they typically do exhibited higher levels of (a) perceived control, (b) goal focus, (c) perceived partner support, and (d) positive affect during goal pursuit than they typically exhibit. Together, these 4 self-regulation-relevant variables translated into higher rates of daily progress on specific, idiographic goals. In Study 2 (N = 195), we employed a novel experimental manipulation of SRS, replicating the link between SRS and parameters of effective self-regulation. Taken together, these findings suggest that momentary increases in relationship satisfaction may benefit everyday goal pursuit through a combination of cognitive and affective mechanisms, thus further integrating relationship research with social–cognitive research on goal pursuit.

---------------------

Does Marriage Moderate Genetic Effects on Delinquency and Violence?

Yi Li, Hexuan Liu & Guang Guo
Journal of Marriage and Family, forthcoming

Abstract:
Using data from the National Longitudinal Study of Adolescent to Adult Health (N = 1,254), the authors investigated whether marriage can foster desistance from delinquency and violence by moderating genetic effects. In contrast to existing gene–environment research that typically focuses on one or a few genetic polymorphisms, they extended a recently developed mixed linear model to consider the collective influence of 580 single nucleotide polymorphisms in 64 genes related to aggression and risky behavior. The mixed linear model estimates the proportion of variance in the phenotype that is explained by the single nucleotide polymorphisms. The authors found that the proportion of variance in delinquency/violence explained was smaller among married individuals than unmarried individuals. Because selection, confounding, and heterogeneity may bias the estimate of the Gene × Marriage interaction, they conducted a series of analyses to address these issues. The findings suggest that the Gene × Marriage interaction results were not seriously affected by these issues.

---------------------

Her Support, His Support: Money, Masculinity, and Marital Infidelity

Christin Munsch
American Sociological Review, June 2015, Pages 469-495

Abstract:
Recent years have seen great interest in the relationship between relative earnings and marital outcomes. Using data from the 1997 National Longitudinal Survey of Youth, I examine the effect of relative earnings on infidelity, a marital outcome that has received little attention. Theories of social exchange predict that the greater one’s relative income, the more likely one will be to engage in infidelity. Yet, emerging literature raises questions about the utility of gender-neutral exchange approaches, particularly when men are economically dependent and women are breadwinners. I find that, for men, breadwinning increases infidelity. For women, breadwinning decreases infidelity. I argue that by remaining faithful, breadwinning women neutralize their gender deviance and keep potentially strained relationships intact. I also find that, for both men and women, economic dependency is associated with a higher likelihood of engaging in infidelity; but, the influence of dependency on men’s infidelity is greater than the influence of dependency on women’s infidelity. For economically dependent persons, infidelity may be an attempt to restore relationship equity; however, for men, dependence may be particularly threatening. Infidelity may allow economically dependent men to engage in compensatory behavior while simultaneously distancing themselves from breadwinning spouses.

---------------------

The Earned Income Tax Credit and Union Formation: The Impact of Expected Spouse Earnings

Katherine Michelmore
University of Michigan Working Paper, May 2015

Abstract:
The earned income tax credit (EITC) has become the largest cash transfer program in the United States, distributing nearly $60 billion dollars in credits in 2010. Several studies have evaluated the impact of the EITC on various aspects of behavioral responses. Using the Survey of Income and Program Participation from 2001, 2004, and 2008, I investigate how the change in expected household EITC benefits associated with marrying affect cohabitation and marriage behavior among low-income women. I first simulate a marriage market to predict potential spouse earnings for a sample of low-income women in order to estimate the potential losses or gains in EITC benefits upon marriage. Using multinomial logistic regressions, I then analyze how not only the value of the EITC, but also the anticipated loss in EITC benefits upon marriage affects the likelihood of marrying or cohabiting. Results suggest that the average EITC-eligible woman can expect to lose approximately $1,000 in EITC benefits in the year following marriage, or about half of her pre-marriage benefit. Further, I find that a $1,000 loss in expected EITC benefits upon marriage is associated with a 1.1 percentage point decline in the likelihood of marrying and a 0.7 percentage point increase in the likelihood of cohabiting.

---------------------

Life-Course Partnership Status and Biomarkers in Midlife: Evidence From the 1958 British Birth Cohort

George Ploubidis et al.
American Journal of Public Health, August 2015, Pages 1596-1603

Objectives: We examined the association between trajectories of partnership status over the life course and objectively measured health indicators in midlife.

Methods: We used data from 4 waves (1981, 1991, 2000, and 2002–2004) of the British National Child Development Study (NCDS), a prospective cohort study that includes all people born in Britain during 1 week in March 1958 (n = 18 558).

Results: After controlling for selection attributable to early-life and early-adulthood characteristics, we found that life-course trajectories of partnership status were associated with hemostatic and inflammatory markers, the prevalence of metabolic syndrome and respiratory function in midlife. Never marrying or cohabiting was negatively associated with health in midlife for both genders, but the effect was more pronounced in men. Women who had married in their late 20s or early 30s and remained married had the best health in midlife. Men and women in cohabiting unions had midlife health outcomes similar to those in formal marriages.

Conclusions: Partnership status over the life course has a cumulative effect on a wide range of objectively measured health indicators in midlife.

---------------------

Nonmarital Relationships and Changing Perceptions of Marriage Among African American Young Adults

Ashley Barr, Ronald Simons & Leslie Gordon Simons
Journal of Marriage and Family, forthcoming

Abstract:
Cohabitation has become increasingly widespread over the past decade. Such trends have given rise to debates about the relation between cohabitation and marriage in terms of what cohabitation means for individual relationship trajectories and for the institution of marriage more generally. Using recent data from a sample of almost 800 African Americans and fixed effects modeling procedures, in the present study the authors shed some light on these debates by exploring the extent to which cohabitation, relative to both singlehood and dating, was associated with within-individual changes in African Americans' marital beliefs during the transition to adulthood. The findings suggest that cohabitation is associated with changes in marital beliefs, generally in ways that repositioned partners toward marriage, not away from it. This was especially the case for women. These findings suggest that, for young African American women, cohabitation holds a distinct place relative to dating and, in principle if not practice, relative to marriage.

---------------------

Jealousy: Evidence of strong sex differences using both forced choice and continuous measure paradigms

Mons Bendixen, Leif Edward Ottesen Kennair & David Buss
Personality and Individual Differences, November 2015, Pages 212–216

Abstract:
Despite some controversy about sex differences in jealousy, data largely support that sex differences studied with the forced choice (FC) paradigm are robust: Men, relative to women, report greater jealousy in response to sexual infidelity than in response to emotional infidelity. Corresponding sex differences for continuous measures of jealousy typically have been less robust in the literature. A large sample of Norwegian students (N = 1074) randomly responded to either FC or continuous measure questionnaires covering four infidelity scenarios. Large, comparable, theoretically-predicted sex differences were evident for both FC and continuous measures. Relationship status, infidelity experiences, and question order manipulation (activation) did not consistently influence the sex differences for either measure, nor did individual differences in sociosexual orientation or relationship commitment. These large sex differences are especially noteworthy as they emerge from a highly egalitarian nation with high paternal investment expectancy, and because they contradict social role theories that predict a diminution of psychological sex differences as gender economic equality increases.

---------------------

The Suffocation Model: Why Marriage in America Is Becoming an All-or-Nothing Institution

Eli Finkel et al.
Current Directions in Psychological Science, June 2015, Pages 238-244

Abstract:
Throughout American history, the fundamental purpose of marriage has shifted from (a) helping spouses meet their basic economic and political needs to (b) helping them meet their intimacy and passion needs to (c) helping them meet their autonomy and personal-growth needs. According to the suffocation model of marriage in America, these changes have had two major consequences for marital quality, one negative and one positive. The negative consequence is that, as Americans have increasingly looked to their marriage to help them meet idiosyncratic, self-expressive needs, the proportion of marriages that fall short of their expectations has grown, which has increased rates of marital dissatisfaction. The positive consequence is that those marriages that succeed in meeting these needs are particularly fulfilling, more so than the best marriages in earlier eras. In tandem, these two consequences have pushed marriage toward an all-or-nothing state.

---------------------

Divorce: What Does Learning Have to Do with it?

Ioana Elena Marinescu
University of Chicago Working Paper, May 2015

Abstract:
Learning about marriage quality has been proposed as a key mechanism for explaining how the probability of divorce evolves with marriage duration, and why people often cohabit before getting married. I develop four theoretical models of divorce, three of which include learning. I use data from the Survey of Income and Program Participation to test reduced form implications of these models. The data is inconsistent with models including a substantial amount of learning. On the other hand, the data is consistent with a model without any learning, but where marriage quality changes over time.

---------------------

Is emotion suppression beneficial or harmful? It depends on self-regulatory strength

Fay Geisler & Michela Schröder-Abé
Motivation and Emotion, August 2015, Pages 553-562

Abstract:
The emotion regulation strategy of expressive suppression intervenes late in the process of emotion generation and encompasses two self-control tasks: the inhibition of the experience of emotion and the inhibition of the expression of emotion. Thus, expressive suppression requires effortful self-control, and therefore the consequences of expressive suppression may differ depending on self-regulatory strength. We examined the influence of trait self-regulatory strength on the outcomes of spontaneous expressive suppression in 102 participants who discussed a topic of conflict with their partners. Self-regulatory strength was assessed via high-frequency heart rate variability measured at rest (HF-HRV). As expected, expressive suppression was positively associated with negative affect in participants with low (but not high) HF-HRV. Furthermore, expressive suppression was positively associated with the partner’s relationship satisfaction and constructive social behavior in participants with high (but not low) HF-HRV. To conclude, the present research demonstrates how considering expressive suppression as an act of self-control can yield a more differentiated perspective on the outcomes of expressive suppression.

---------------------

Intimate Partner Violence Risk among Victims of Youth Violence: Are Early Unions Bad, Beneficial, or Benign?

Danielle Kuhl, David Warner & Tara Warner
Criminology, forthcoming

Abstract:
Youth violent victimization (YVV) is a risk factor for precocious exits from adolescence via early coresidential union formation. It remains unclear, however, whether these early unions 1) are associated with intimate partner violence (IPV) victimization, 2) interrupt victim continuity or victim–offender overlap through protective and prosocial bonds, or 3) are inconsequential. By using data from the National Longitudinal Study of Adolescent to Adult Health (N = 11,928; 18–34 years of age), we examine competing hypotheses for the effect of early union timing among victims of youth violence (n = 2,479) — differentiating across victimization only, perpetration only, and mutually combative relationships and considering variation by gender. The results from multinomial logistic regression models indicate that YVV increases the risk of IPV victimization in first unions, regardless of union timing; the null effect of timing indicates that delaying union formation would not reduce youth victims’ increased risk of continued victimization. Gender-stratified analyses reveal that earlier unions can protect women against IPV perpetration, but this is partly the result of an increased risk of IPV victimization. The findings suggest that YVV has significant transformative consequences, leading to subsequent victimization by coresidential partners, and this association might be exacerbated among female victims who form early unions. We conclude by discussing directions for future research.

By KEVIN LEWIS | 09:00:00 AM

Monday, July 27, 2015

Money trail

A New Look at the U.S. Foreclosure Crisis: Panel Data Evidence of Prime and Subprime Borrowers from 1997 to 2012

Fernando Ferreira & Joseph Gyourko
NBER Working Paper, June 2015

Abstract:
Utilizing new panel micro data on the ownership sequences of all types of borrowers from 1997-2012 leads to a reinterpretation of the U.S. foreclosure crisis as more of a prime, rather than a subprime, borrower issue. Moreover, traditional mortgage default factors associated with the economic cycle, such as negative equity, completely account for the foreclosure propensity of prime borrowers relative to all-cash owners, and for three-quarters of the analogous subprime gap. Housing traits, race, initial income, and speculators did not play a meaningful role, and initial leverage only accounts for a small variation in outcomes of prime and subprime borrowers.

---------------------

How do insured deposits affect bank risk? Evidence from the 2008 Emergency Economic Stabilization Act

Claudia Lambert, Felix Noth & Ulrich Schüwer
Journal of Financial Intermediation, forthcoming

Abstract:
This paper tests whether an increase in insured deposits causes banks to become more risky. We use variation introduced by the U.S. Emergency Economic Stabilization Act in October 2008, which increased the deposit insurance coverage from $100,000 to $250,000 per depositor and bank. For some banks, the amount of insured deposits increased significantly; for others, it was a minor change. Our analysis shows that the more affected banks increase their investments in risky commercial real estate loans and become more risky relative to unaffected banks following the change. This effect is most distinct for affected banks that are low capitalized.

---------------------

Ex Ante CEO Severance Pay and Risk-Taking in the Financial Services Sector

Kareen Brown, Ranjini Jha & Parunchana Pacharn
Journal of Banking & Finance, October 2015, Pages 111–126

Abstract:
We examine 533 CEO severance contracts for financial services firms from 1997 to 2007 and find that ex-ante severance pay is positively associated with risk-taking after controlling for the incentive effects provided by equity-based compensation. We report a positive causal relation between the amount of severance pay and risk-taking using popular market-based risk measures as well as distance-to-default and the Z-score. We also find that severance pay encourages excessive risk-taking using metrics such as tail risk and asset quality. Our results are consistent with the risk-shifting argument and provide support for recent reforms on severance pay in the financial sector.

---------------------

Loan Originations and Defaults in the Mortgage Crisis: Further Evidence

Manuel Adelino, Antoinette Schoar & Felipe Severino
NBER Working Paper, July 2015

Abstract:
This paper addresses two critiques by Mian and Sufi (2015a, 2015b) that were released in response to the results documented in Adelino, Schoar and Severino (2015). We confirm that none of the results in our previous paper are affected by the issues put forward in these critiques; in particular income overstatement does not drive any of our results. Our analysis shows that the origination of purchase mortgages increased across the whole income distribution during the 2002-2006 housing boom, and did not flow disproportionately to low-income borrowers. In addition, middle- and high-income, as well as middle- and high-credit-score borrowers (not the poor), represent a larger fraction of delinquencies in the crisis relative to earlier periods. The results are inconsistent with the idea that distortions in the origination of credit caused the housing boom and the crisis and are more consistent with an expectations-based view where both home buyers and lenders were buying into increasing housing values and defaulted once prices dropped.

---------------------

Deregulation, Competition and the Race to the Bottom

Marco Di Maggio, Amir Kermani & Sanket Korgaonkar
Columbia University Working Paper, March 2015

Abstract:
We take advantage of the pre-emption of national banks from state anti-predatory lending laws as a quasi-experiment to study the effect of deregulation and its interaction with competition on the supply of complex mortgages (interest only, negative amortization, and teaser mortgages). We first show that following the pre-emption ruling, national banks significantly increased their origination of loans with prepayment penalties and negative amortization features, relative to non-OCC regulated lenders, and lenders in states without anti-predatory lending laws. This increase in the supply of complex mortgages is significantly more pronounced for banks that poorly performed in the previous quarters. Further, we highlight a competition channel: first, a higher degree of competition induce OCC lenders to originate more riskier loans; second, in counties where OCC regulated lenders had larger market share prior to the pre-emption, even non-OCC lenders responded by increasing the presence of predatory terms to the extent permitted by the state anti-predatory lending laws. Overall, our evidence is suggestive that the deregulation of credit markets ignited a "race to the bottom" among distressed financial institutions, working through the competition between lenders.

---------------------

Household Debt and Defaults from 2000 to 2010: Facts from Credit Bureau Data

Atif Mian & Amir Sufi
NBER Working Paper, May 2015

Abstract:
We use individual level credit bureau data to document which individuals saw the biggest rise in household debt from 2000 to 2007 and the biggest rise in defaults from 2007 to 2010. Growth in household debt from 2000 to 2007 was substantially larger for individuals with the lowest initial credit scores. However, initial debt levels were lower for individuals in the lowest 20% of the initial credit score distribution. As a result, the contribution to the total dollar rise in household debt was strongest among individuals in the 20th to 60th percentile of the initial credit score distribution. Consistent with the importance of home-equity based borrowing, the increase in debt is especially large among individuals in the lowest 60% of the credit score distribution living in high house price growth zip codes. In contrast, the borrowing of individuals in the top 20% of the credit score distribution is completely unresponsive to higher house price growth. In terms of defaults, the evidence is unambiguous: both default rates and the share of total delinquent debt is largest among individuals with low initial credit scores. The bottom 40% of the credit score distribution is responsible for 73% of the total amount of delinquent debt in 2007, and 68% of the total in 2008. Individuals in the top 40% of the initial credit score distribution never make up more than 15% of total delinquencies, even in 2009 at the height of the default crisis.

---------------------

How Does Executive Compensation Affect Bank Risk Taking: Evidence from FAS 123R

Yongqiang Chu & Tao Ma
University of South Carolina Working Paper, June 2015

Abstract:
We examine how executive compensation affects bank risk taking in mortgage lending using exogenous variations in stock option grants generated by the FAS 123R, which requires all firms to expense options. Using a difference-in-differences approach, we find that banks that did not expense options before FAS 123R (treated firms) significantly decreases their approval rates of risky mortgage applications after FAS 123R relative to banks that did not grant stock options or voluntarily expensed their stock option before FAS 123R (control banks). We also find that the treatment effect is concentrated in large banks, suggesting that executives’ risk-taking incentives at large banks are more sensitive to option compensation. This is consistent with the idea that government implicit guarantee on too-big-to-fail banks encourages bank risk-taking. Lastly, we show that treatment banks are more likely than control banks to reduce their exposure to risky mortgage loans through securitization after FAS 123R. Overall, we provide consistent evidence that executive option compensation affects mortgage lending practices in financial institutions, which eventually contributes to the 2008-2009 financial crisis.

---------------------

Does Bankruptcy Law Affect Business Turnover? Evidence from New and Existing Business

Shawn Rohlin & Amanda Ross
Economic Inquiry, forthcoming

Abstract:
This study examines how differences in state bankruptcy laws, specifically the homestead exemption, affect business turnover by studying both new and existing businesses. We focus on areas just near state boundaries to control for unobserved local attributes to better isolate the effect of more wealth protection. We find that an increase in the homestead exemption attracts new businesses but also has a positive impact on existing businesses, suggesting that asset protection through bankruptcy law encourages successful entrepreneurs to incur the risks. Our results indicate that the personal bankruptcy law is an important policy tool that governments can use to encourage business growth without causing business turnover.

---------------------

Risk and Risk Management in the Credit Card Industry

Florentin Butaru et al.
NBER Working Paper, June 2015

Abstract:
Using account level credit-card data from six major commercial banks from January 2009 to December 2013, we apply machine-learning techniques to combined consumer-tradeline, credit-bureau, and macroeconomic variables to predict delinquency. In addition to providing accurate measures of loss probabilities and credit risk, our models can also be used to analyze and compare risk management practices and the drivers of delinquency across the banks. We find substantial heterogeneity in risk factors, sensitivities, and predictability of delinquency across banks, implying that no single model applies to all six institutions. We measure the efficacy of a bank’s risk-management process by the percentage of delinquent accounts that a bank manages effectively, and find that efficacy also varies widely across institutions. These results suggest the need for a more customized approached to the supervision and regulation of financial institutions, in which capital ratios, loss reserves, and other parameters are specified individually for each institution according to its credit-risk model exposures and forecasts.

---------------------

State Bankruptcy Laws and the Responsiveness of Credit Card Demand

Amanda Dawsey
Journal of Economics and Business, September–October 2015, Pages 54–76

Abstract:
The responsiveness of credit demand to interest rate changes may vary widely by state due to differences in state bankruptcy and insolvency laws. Bankruptcy exemptions and other state laws insulate borrowers against negative consequences from non-repayment, and so lenient regulations may lead to decreased responsiveness to interest rate increases. Lenient laws also decrease creditors’ incentive to lend, and a resulting decrease in loan options will reinforce the inelasticity of credit demand. This paper presents a model that predicts (1) that credit demand is less responsive in states with borrower-friendly, lenient bankruptcy and insolvency laws, and (2) the effects of state laws on demand elasticity will be strongest among borrowers facing credit constraints. Using market experiment data from a large credit card issuer, this paper presents evidence that supports the hypothesis that demand responsiveness and insolvency law leniency are negatively related. Borrowers are more likely to continue using a card in states with lenient exemption and garnishment laws. Borrowers who take up less attractive offers are more likely to be credit constrained; among these borrowers, the impact of exemption laws is much stronger than among the unconstrained group.

---------------------

Protecting Financial Stability in the Aftermath of World War I: The Federal Reserve Bank of Atlanta's Dissenting Policy

Eugene White
NBER Working Paper, July 2015

Abstract:
During the 1920-1921 recession, the Federal Reserve Bank of Atlanta resisted the deflationary policy sanctioned by the Federal Reserve Board and pursued by other Reserve banks. By borrowing gold reserves from other Reserve banks, it facilitated a reallocation of liquidity to its district during the contraction. Viewing the collapse of the price of cotton, the dominant crop in the region, as a systemic shock to the Sixth District, the Atlanta Fed increased discounting and enabled capital infusions to aid its member banks. The Atlanta Fed believed that it had to limit bank failures to prevent a fire sale of cotton collateral that would precipitate a general panic. In this previously unknown episode, the Federal Reserve Board applied considerable pressure on the Atlanta Fed to adhere to its policy and follow a simple Bagehot-style rule. The Atlanta Fed was vindicated when the shock to cotton prices proved to be temporary, and the Board conceded that the Reserve Bank had intervened appropriately.

---------------------

Bankruptcy Discharge and the Emergence of Debtor Rights in Eighteenth Century England

Ann Carlos, Edward Kosack & Luis Castro Penarrieta
University of Colorado Working Paper, May 2015

Abstract:
Bankruptcy is a precise legal process defining the rules when debtor fails to repay their debts. These rules determine willingness to lend and to borrow and thus can affect economic growth. In 1706, the English Parliament passed a bankruptcy statute that provided potential rights for bankrupts and represents a fundamental change in the rules regarding bankruptcy. Where previously a bankrupt could exit bankruptcy only upon full repayment of debts, creditors could now choose to discharge a bankrupt prior to full repayment of his debts. In this paper, we develop a simple model to explore why creditors might discharge a bankrupt, and conduct an empirical analysis of archival bankruptcy data to show that discharges actually occurred. Not only did bankrupts benefit when creditors chose to discharge bankrupts prior to full payment, but also we find that creditors could benefit due to greater asset revelation by bankrupts.

---------------------

Corporate governance and performance of financial institutions

Andrey Zagorchev & Lei Gao
Journal of Economics and Business, forthcoming

Abstract:
We examine how corporate governance affects financial institutions in the U.S. between 2002 and 2009. First, we find that better governance is negatively related to excessive risk-taking and positively related to the performance of U.S. financial institutions. Specifically, sound overall and specific governance practices are associated with less total non-performing assets, less real estate non-performing assets, and higher Tobin's Q. Second, we show that better governance contributes to higher provisions and reserves for loan/asset losses of financial institutions, supporting the income smoothing hypothesis. Moreover, the results are similar without the financial crisis period, and different robustness checks confirm the analysis.

---------------------

Shareholders’ preference for excessively risky projects, equilibrium debt contracts, and bailouts

Michael Smith
Journal of Accounting and Public Policy, May–June 2015, Pages 244–266

Abstract:
I show that bailouts can reduce excessive risk-taking. After receiving debt financing, a limited-liability firm chooses between two projects. The safe project results in higher expected cash flows. The excessively risky project results in lower expected debt repayments because default occurs more often. In equilibrium, the creditor anticipates the risk choice of the firm and sets the debt repayment to obtain its required rate of return. The implicit bailout subsidy allows the creditor to lower the debt service payment. As a result, the incremental default benefit of the risky project is lower, leading to less risk-taking. The results inform the ongoing debate about the determinants of risk-taking by firms.

---------------------

CMBS and Conflicts of Interest: Evidence from a Natural Experiment on Servicer Ownership

Maisy Wong
University of Pennsylvania Working Paper, May 2015

Abstract:
I study a natural experiment in commercial mortgage-backed securities (CMBS) where some special servicers changed owners (treatment group) from 2009-2010 but not others (placebo group). The ownership change linked sellers (special servicers who liquidate CMBS assets on behalf of bondholders) and buyers (new owners), presenting a classic self-dealing conflict. Average loss rates for liquidations are 11 percentage points higher (implying additional losses of $3.2 billion for bondholders) after treated special servicers changed owners, but not for the placebo group. I provide the first direct measure of self-dealing that links buyers and sellers in securities markets in the United States.

By KEVIN LEWIS | 09:00:00 AM

Sunday, July 26, 2015

How nice of you

Give a piece of you: Gifts that reflect givers promote closeness

Lara Aknin & Lauren Human
Journal of Experimental Social Psychology, September 2015, Pages 8–16

Abstract:
Gift giving is an ancient, ubiquitous and familiar behavior often thought to build and foster social connections, but what types of gifts are most effective in increasing closeness between the giver and the recipient? In six studies we explore both the perceptions and relational outcomes of gifts that reflect the giver (giver-centric gifts) and gifts that reflect the recipient (recipient-centric gifts). Across studies, we find a strong and consistent preference for giving and receiving recipient-centric gifts. Surprisingly, however, in the gift-giving contexts examined in these studies, both givers and receivers report greater feelings of closeness to their gift partner when the gift reflects the giver.

---------------------

A Large Scale Test of the Effect of Social Class on Prosocial Behavior

Martin Korndörfer, Boris Egloff & Stefan Schmukle
PLoS ONE, July 2015

Abstract:
Does being from a higher social class lead a person to engage in more or less prosocial behavior? Psychological research has recently provided support for a negative effect of social class on prosocial behavior. However, research outside the field of psychology has mainly found evidence for positive or u-shaped relations. In the present research, we therefore thoroughly examined the effect of social class on prosocial behavior. Moreover, we analyzed whether this effect was moderated by the kind of observed prosocial behavior, the observed country, and the measure of social class. Across eight studies with large and representative international samples, we predominantly found positive effects of social class on prosociality: Higher class individuals were more likely to make a charitable donation and contribute a higher percentage of their family income to charity (32,090 ≥ N ≥ 3,957; Studies 1–3), were more likely to volunteer (37,136 ≥N ≥ 3,964; Studies 4–6), were more helpful (N = 3,902; Study 7), and were more trusting and trustworthy in an economic game when interacting with a stranger (N = 1,421; Study 8) than lower social class individuals. Although the effects of social class varied somewhat across the kinds of prosocial behavior, countries, and measures of social class, under no condition did we find the negative effect that would have been expected on the basis of previous results reported in the psychological literature. Possible explanations for this divergence and implications are discussed.

---------------------

Give me your self: Gifts are liked more when they match the giver's characteristics

Gabriele Paolacci, Laura Straeter & Ilona de Hooge
Journal of Consumer Psychology, July 2015, Pages 487–494

Abstract:
Research on gift giving has devoted considerable attention to understanding whether and how givers succeed in choosing gifts that match recipients' tastes. On the contrary, this article focuses on how recipients' appreciation for a gift depends on the match between the gift and the giver. Four studies demonstrate that recipients are particularly appreciative when they receive gifts that figuratively match the giver, i.e., that contain references to the giver's characteristics, because they perceive such gifts as more congruent with the giver's identity. This effect is not conditional on inferences recipients might make about the giver's motivations or on whether recipients have a good relationship with the giver, but relies on the match concerning core rather than peripheral characteristics of the giver. Importantly for our understanding of identity-based motivation, these findings demonstrate in a gift-giving context that identity-congruence not only drives consumer behavior, but is also appreciated in other people.

---------------------

When Gift-Giving Is Selfish: A Motivation to Be Unique

Jeff Galak & Julian Givi
Carnegie Mellon University Working Paper, July 2015

Abstract:
Gift givers are faced with the difficult task of choosing gifts that will be liked by gift recipients, and the challenging nature of this task often leads gift givers to unintentionally give poor gifts. The results of seven lab and field studies across 1,513 participants suggest that this failure on the part of gift givers is not always unintentional. Rather, it seems that gift givers possess a need for uniqueness and that this longing often leads them to knowingly give poor gifts. The present research demonstrates a robust effect in which gift givers, in some contexts, give gift recipients inferior gifts, because gift givers have a selfish motive in that they want their own possessions to feel unique. Conversely, when given the opportunity to choose between gifts for the self, gift recipients ignore this need for uniqueness in favor of obtaining an optimal gift. This effect holds across a variety of gifts, and gift-giving paradigms.

---------------------

Beauty, Weight, and Skin Color in Charitable Giving

Christina Jenq, Jessica Pan & Walter Theseira
Journal of Economic Behavior & Organization, forthcoming

Abstract:
This paper examines bias in online charitable microfinance lending. We find that charitable lenders on a large peer-to-peer online microfinance website appear to favor more attractive, lighter-skinned, and less obese borrowers. Borrowers who appear more needy, honest and creditworthy also receive funding more quickly. These effects are quantitatively significant: Borrowers with beauty one standard deviation above average are treated as though they are requesting approximately 11% less money. Statistical discrimination does not appear to explain our findings, as these borrower attributes are uncorrelated with loan performance or borrower enterprise performance. The evidence suggests implicit bias could explain our findings: more experienced lenders, who may rely less on implicit attitudes, appear to exhibit less bias than inexperienced lenders.

---------------------

Roots and Benefits of Costly Giving: Children Who Are More Altruistic Have Greater Autonomic Flexibility and Less Family Wealth

Jonas Miller, Sarah Kahle & Paul Hastings
Psychological Science, July 2015, Pages 1038-1045

Abstract:
Altruism, although costly, may promote well-being for people who give. Costly giving by adults has received considerable attention, but less is known about the possible benefits, as well as biological and environmental correlates, of altruism in early childhood. In the current study, we present evidence that children who forgo self-gain to help other people show greater vagal flexibility and higher subsequent vagal tone than children who do not, and children from less wealthy families behave more altruistically than those from wealthier families. These results suggest that (a) altruism should be viewed through a biopsychosocial lens, (b) the influence of privileged contexts on children’s willingness to make personal sacrifices for others emerges early, and (c) altruism and healthy vagal functioning may share reciprocal relations in childhood. When children help others at a cost to themselves, they could be playing an active role in promoting their own well-being as well as the well-being of others.

---------------------

Cultivating Disaster Donors Using Data Analytics

Ilya Ryzhov, Bin Han & Jelena Bradić
Management Science, forthcoming

Abstract:
Nonprofit organizations use direct-mail marketing to cultivate one-time donors and convert them into recurring contributors. Cultivated donors generate much more revenue than new donors, but also lapse with time, making it important to steadily draw in new cultivations. The direct-mail budget is limited, but better-designed mailings can improve success rates without increasing costs. We propose an empirical model to analyze the effectiveness of several design approaches used in practice, based on a massive data set covering 8.6 million direct-mail communications with donors to the American Red Cross during 2009–2011. We find evidence that mailed appeals are more effective when they emphasize disaster preparedness and training efforts over post-disaster cleanup. Including small cards that affirm donors’ identity as Red Cross supporters is an effective strategy, whereas including gift items such as address labels is not. Finally, very recent acquisitions are more likely to respond to appeals that ask them to contribute an amount similar to their most recent donation, but this approach has an adverse effect on donors with a longer history. We show via simulation that a simple design strategy based on these insights has potential to improve success rates from 5.4% to 8.1%.

---------------------

Prosociality enhances meaning in life

Daryl Van Tongeren et al.
Journal of Positive Psychology, forthcoming

Abstract:
A central feature of meaning in life is a consideration of more than oneself. We extend this logic to suggest that altruistically motivated prosociality – acting in ways that benefit others – is a self-transcending action that may provide meaning in life. Study 1 provided evidence of a relationship between self-reported prosocial behavior and meaning in life, even after statistically controlling for personality traits and self-esteem. Study 2 provided evidence that engaging in a prosocial action, via writing notes of gratitude, increased meaning in life. Study 3 provided evidence that individuals bolster perceptions of prosociality following threats to meaning. Study 4 suggested relationship satisfaction partially mediates the link between prosocial actions and meaning in life. These studies provide initial evidence that prosociality enhances meaning in life.

---------------------

Doing good when times are bad: Volunteering behaviour in economic hard times

Chaeyoon Lim & James Laurence
British Journal of Sociology, June 2015, Pages 319–344

Abstract:
This paper examines how the 2008–9 recession has affected volunteering behaviours in the UK. Using a large survey dataset, we assess the recession effects on both formal volunteering and informal helping behaviours. Whilst both formal volunteering and informal helping have been in decline in the UK since 2008, the size of the decline is significantly larger for informal helping than for formal volunteering. The decline is more salient in regions that experienced a higher level of unemployment during the recession and also in socially and economically disadvantaged communities. However, we find that a growing number of people who personally experienced financial insecurity and hardship do not explain the decline. We argue that the decline has more to do with community-level factors such as civic organizational infrastructure and cultural norms of trust and engagement than personal experiences of economic hardship.

---------------------

A Friend in Need: Time-Dependent Effects of Stress on Social Discounting in Men

Z. Margittai et al.
Hormones and Behavior, July 2015, Pages 75–82

Abstract:
Stress is often associated with a tend-and-befriend response, a putative coping mechanism where people behave generously towards others in order to invest in social relationships to seek comfort and mutual protection. However, this increase in generosity is expected to be directed only towards a delimited number of socially close, but not distant individuals, because it would be maladaptive to befriend everyone alike. In addition, the endocrinological stress response follows a distinct temporal pattern, and it is believed that tend-and-befriend tendencies can be observed mainly under acute stress. By contrast, the aftermath (> 1 hour after) of stress is associated with endocrinological regulatory processes that are proposed to cause increased executive control and reduced emotional reactivity, possibly eliminating the need to tend-and-befriend. In the present experiment, we set out to investigate how these changes immediately and > 1 hour after a stressful experience affect social-distance-dependent generosity levels, a phenomenon called social discounting. We hypothesized that stress has a time-dependent effect on social discounting, with decisions made shortly after (20 min), but not 90 min after stress showing increased generosity particularly to close others. We found that men tested 20 min after stressor onset indeed showed increased generosity towards close but not distant others compared to non-stressed men or men tested 90 minutes after stressor onset. These findings contribute to our understanding on how stress affects prosocial behavior by highlighting the importance of social closeness and the timing of stress relative to the decision as modulating factors in this type of decision making in men.

By KEVIN LEWIS | 09:00:00 AM


1  2  3  4  5  6  7  8  9  10   Next