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...is is a vast topic and we limit ourselves here to providing some references in the different fields of behavioral finance (Shefrin and Statman 1985), economics (Arrow 1986, Kahneman and Tversky 1979, =-=Thaler 1980-=-, Thaler 1981, Tversky and Kahneman 1991), decision sciences (Bell, Raiffa, and Tversky 1988), marketing (Thaler 1985) and psychology (Kahneman and Tversky 1973, Kahneman and Tversky 1984). Organizati...

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...limit ourselves here to providing some references in the different fields of behavioral finance (Shefrin and Statman 1985), economics (Arrow 1986, Kahneman and Tversky 1979, Thaler 1980, Thaler 1981, =-=Tversky and Kahneman 1991-=-), decision sciences (Bell, Raiffa, and Tversky 1988), marketing (Thaler 1985) and psychology (Kahneman and Tversky 1973, Kahneman and Tversky 1984). Organizational Decision Making By “organizational ...

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... demonstrated the inconsistency and irrationality of many economic agents. This is a vast topic and we limit ourselves here to providing some references in the different fields of behavioral finance (=-=Shefrin and Statman 1985-=-), economics (Arrow 1986, Kahneman and Tversky 1979, Thaler 1980, Thaler 1981, Tversky and Kahneman 1991), decision sciences (Bell, Raiffa, and Tversky 1988), marketing (Thaler 1985) and psychology (K...

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...ance (Shefrin and Statman 1985), economics (Arrow 1986, Kahneman and Tversky 1979, Thaler 1980, Thaler 1981, Tversky and Kahneman 1991), decision sciences (Bell, Raiffa, and Tversky 1988), marketing (=-=Thaler 1985-=-) and psychology (Kahneman and Tversky 1973, Kahneman and Tversky 1984). Organizational Decision Making By “organizational decision making”, we refer to any decision making situation that involves a c...

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...complex organization have incentives to cooperate. Designing such incentive-compatible mechanisms requires a game theoretic mindset and Thaler suggests using “prescriptive” game theoretic approaches (=-=Thaler 1992-=-). We also refer the interested reader to the review by Kreps on “mechanism design” (Kreps 1990). Also, Collomb provides a thorough treatment on how to formulate “reasonable” objectives when facing th...

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...dani and Sharma (Hong, Kudik, and Solomon 2000, Bikhchandani and Sharma 2001). Generally speaking, a wide range of social dynamics can also account for stock price movements as documented by Shiller (=-=Shiller 1984-=-). All these endogenous phenomena underline the fact that stock price movements are not just the product of exogenous shocks but also of endogenous fluctuations of opinions, group pressures and other ...

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...r than the market. This was a natural endeavor if one believed markets were unpredictable. We provide here a few references such as (in chronological order) the studies by Treynor, Sharpe and Jensen (=-=Treynor 1965-=-, Sharpe 1966, Jensen 1968, Jensen 1969), all written between 1965 and 1969. What these studies underlined was that, net of management fees, active managers were on average doing no better than the ma...

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...s A. 4.1.4 Previous Evidence of Momentum We provide here an analysis on momentum in market indices. This will show that successive price variations are not necessarily independent. As Sornette shows (=-=Sornette 2003-=-), there is strong evidence of local burst of serial correlation by looking at drawdowns (defined as a ”persistent decrease in the price over consecutive days”). Sornette writes that: Drawdowns are in...

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...topic and we limit ourselves here to providing some references in the different fields of behavioral finance (Shefrin and Statman 1985), economics (Arrow 1986, Kahneman and Tversky 1979, Thaler 1980, =-=Thaler 1981-=-, Tversky and Kahneman 1991), decision sciences (Bell, Raiffa, and Tversky 1988), marketing (Thaler 1985) and psychology (Kahneman and Tversky 1973, Kahneman and Tversky 1984). Organizational Decision...

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... behavior is best described by a game theoretic framework where beliefs about the market in general and about other agents’ behavior need to be taken into account. This idea was popularized by Soros (=-=Soros 1987-=-) who notes that ”the participants’ thinking introduces an element of uncertainty into the subject matter... Situations which have thinking participants may be impervious to the methods of natural sci...

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...of serial independence were carried out that concurred with Bachelier’s assertion that markets are random. We mention here the studies by Cowles , Working, Cowles and Jones, and Kendall (Cowles 1933, =-=Working 1934-=-, Cowles and Jones 1937, Kendall 1953). The work by Osborne showed that geometric Brownian motion was more appropriate for the limiting distribution than Brownian motion (Osborne 1959). Building upon ...

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... memory requirements for any basis factorization are reduced. The approach is similar to an iterative process for solving linear equations such as a block Gauss-Siedel, as opposed to a direct method (=-=Strang 1988-=-). For some problems, the memory requirements to solve the problem directly may exceed the memory available. By decomposing the larger linear program into smaller subproblems, the subsequent memory ne...

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.... The idea of ”market efficiency” is that the market prices fully reflect the available information on the underlying security and the economic reality of the entity they represent. As Walter states (=-=Walter 2003-=-): If the relevant information necessary for a transaction is correctly transmitted in the price, and considered as an exchange mechanism, the market is then called ”efficient”. With this definition, ...