Federalism As a System of Government Essay Example | Topics and Well Written Essays - 1000 words

Federalism As a System of Government - Essay Example The present research has identified that federalism promotes diversity in the system by allowing states and provinces to devise their own policies in matters related to public welfare such as education, health, and agriculture whereas at the same time it also ensures the unity among the various units of the states by giving the national responsibilities like currency, foreign affairs and defense to the central government. Federalism creates a very healthy political environment in the country which ensures political activity at the grass root level as well because the system of provincial and the system of local governments directly involve people in political activity. In this way people get to know about correct policy making and various policies can be tested in the country at the same time; better political grooming ensures better political leaders as well. Due to the disintegration of powers to various systems of governments reaching the grass root level through local and provinc ial governments, federalism provides a system in which good governance can be ensured. Each government has its own responsibility, federal government is responsible for the security of the country, provincial governments are responsible for the welfare of the public whereas local governments are responsible for providing services to the public; in this way the duties are divided and governments can work with greater efficiency and their performance is greatly enhanced. ... Federalism has turned out to be a very successful system of government however it has certain disadvantages as well. It allows certain disorderly members of the society to manipulate laws of taxation on various different commodities by purchasing and using them in different states because the government cannot impose tax or duty on interprovincial transfer of goods. The diversity in other laws which include laws related to criminal offense also allows the wrongdoers to escape punishment by moving to another state where the offense is not punishable under law. The laws related to social contract like marriage and inheritance are also exploited by people due to diversity among them in provinces and states. In certain situations the system of federal government allows interstate conflict to occur because certain projects related to natural resources and infrastructure which are beneficial for one state can affect people and the interests of any other state, in such a situation a riv alry between the states is promoted and thus the spirit of nationalism is greatly damaged. Federalism very often leads to disputes between states over the division of resources and responsibilities among the states. The federal system of government with its all system of governments is economically very costly to support because there is a large number of elected representatives and officials in the government which are salaried by tax money (Freely and Rubin). The presence of three parallel systems of government also creates complexity in the governance. The federal government is always biased towards one or another province because of the inherent attachment with a political party and thus in certain areas of governance where the provinces and

Behavioural Finance Theory Dissertation

Behavioural Finance Theory Dissertation A survey of behavioral finance 1. Introduction: The Modern investment theory and its application is predicated on the Efficient Markets Hypothesis (EMH), the assumption that markets fully and instantaneously integrate all available information into market prices. Underlying this comprehensive idea is the assumption that the market participants are perfectly rational, and always act in self-interest, making optimal decisions. These assumptions have been challenged. It is difficult to tip over the Neo classical convention that has yielded such insights as portfolio optimization, the Capital Asset Pricing Model, the Arbitrage Pricing Theory, the Cox Ingersoll-Ross theory of the term structure of interest rates, and the Black-Scholes/Merton option pricing model, all of which are predicated on the EMH (Efficient Market Hypothesis) in one way or another. At few points the EMH criticizes the existing literature of behavioral finance, which shows the difference of opinion on psychology economics. The field of psychology has its roots in empirical observation, controlled experimentation, and clinical applications. According to psychology, behavior is the main entity of study, and only after controlled experimental dimensions do psychologists attempt to make inferences about the origins of such behavior. On the contrary, economists typically derive behavior axiomatically from simple principles such as expected utility maximization, making it easier for us to predict economic behavior that are routinely refuted empirically The biggest threats to Modern Portfolio theory is the theory of Behavioral Finance. It is an analysis of why investors make irrational decisions with respect to their money, normal distribution of expected returns generally appears to be invalid and also that the investors support upside risks rather than downside risks. The theory of Behavioral finance is opposite to the traditional theory of Finance which deals with human emotions, sentiments, conditions, biases on collective as well as individual basis. Behavior finance theory is helpful in explaining the past practices of investors and also to determine the future of investors. Behavioral finance is a concept of finance which deals with finances incorporating findings from psychology sociology. It is reviewed that behavioral finance is generally based on individual behavior or on the implication for financial market outcomes. There are many models explaining behavioral finance that explains investors behavior or market irregularities where the rational models fail to provide adequate information. We do not expect such a research to provide a method to make lots of money from the inefficient financial market very fast. Behavioral finance has basically emerged from the theories of psychology, sociology and anthropology the implications of these theories appear to be significant for the efficient market hypothesis, that is based on the positive notion that people behave rationally, maximize their utility and are able to prices observation, a number of anomalies (irregularities) have appeared, which in turn suggest that in the efficient market the principle of rational behavior is not always correct. So, the idea of analyzing other model of human behavior has came up. Further (Gervais, 2001) explained the concept where he says that People like to relate to the stock market as a person having different moods, it can be bad-tempered or high-spirited, it overreacts one day and behaves very normally the other day. As we know that human behavior is unpredictable and it behaves differently in different situations. Lately many researchers have suggested the idea that psychological analysis of investors may be very helpful in understanding the financial markets better. To do so it is important to understand the behavioral finance presenting the concept that The traditional theory has overestimated the rationality of investors , their biases in decisions casting a cumulative impact on asset prices. To many researchers the study of behavior in finance appeared to be a revolution. As it transforms peoples mentality and perception about the markets and factors that influence the markets. â€Å"The paradigm is shifting. People are continuing to walk across th e border from the traditional to the behavioral camp†. (Gervais, 2001, P.2). On the contrary some people believe that may be its too early call it a revolution. Eugene Fama( Gervais, 2001) argued that Behavioral finance has not really shown impacts on the world prices, and the models contradict each other on different point of times. Giving very less account to the behaviorist explanations of trends and the irregularities †anomaly† (any occurrence or object that is strange, unusual, or unique) Also argued that in order to locate the patterns the data mining techniques are much helpful.. Other researchers have also criticized the idea that the behavioral finance models tend to replace the traditional models of market functions. The weaknesses in this area, explained by him (Gervais, 2001) are that generally overreaction and under reaction are the major causes of the market behavior. Where People take the behavior that seems to be easy for the particular study regardless of the fact that whether these biases are either primary factor of economic forces or not. Secondly, Lack of trained and expert people. The field does not have enough trained professionals both in the psychology or finance fields and therefore as a result the models presented is being put up together are improvised. David Hirshleifer (Gervais, 2001) focuses on the individual behavior impacting asset prices and explaining that the field of behavioral finance is currently in its developmental stage, in its way of development it is facing a lot of disagreement which itself is a productive one. Hirshleifer points out that if we apply the conceptual models of behavioral finance to the corporate finance, it can majorly pay off. If the money managers are incorrectly rational, that means that they are probably not evaluating their investment strategies correctly. They might take wrong decisions in their capital structure decisions. It has been found that quite a few people foresee behavioral finance displacing the age old Efficient Markets theory. On the contrary the underlying assumption that the investors and the managers are completely rational makes insightful sense to many people. 2. Traditional Finance Empirical Evidence: Traditional theory assumes that agents are rational the law of one price holds that is a perfect scenario. Where the law of One price states that securities with the same pay off have same price, but in real world this law is violated when people purchase securities in one market for immediate resale in another, in search of higher profits because of price differentials known as Arbitrageurs. And the agents rationality explains the behavior of investor Professional Individual which is generally inconsistent with the rationality or the future predictions. If a market achieves a perfect scenario where agents are rational law of one price holds then the market is efficient. With the availability of amount of information, the form of market changes. It is unlikely that market prices contain all private information. The presence of noise traders (traders, trading randomly not based on information). Researches show that stock returns are typically unpredictable based on past returns wh ere as future returns are predictable to some extent. Few examples from the past literature explains the problem of irrationality which occurs because of naive diversification, behavior influenced by framing, the tendency of investors of committing systematic errors while evaluating public information.(Glaser et al, 2003) Recent studies suggest that peoples` attitude towards the riskiness of a stock in future the individual interpretation may explain the higher level trading volume, which itself is a vast topic for insight. A problem of perception exist in the investors that Stocks have a higher risk adjusted returns than bonds. Another issue with the investors is that these investors either care about the whole stock portfolio or just about the value of each single security in their portfolio and thus ignore the correlations. The concept of ownership society has been promoted in the recent years where people can take better care of their own lives and be better citizen too if they are both owner of financial assets and homeowners. As a researcher suggested that in order to improve the lives of less advantaged in our society is to teach them how to be capitalist, In order to put the ownership society in its right perspective, behavioral finance is needed to be understood. The ownership society seems very attractive when people appear to make profits from their investments. Behavioral finance also is very helpful in understanding justifying government involvement in the investing decisions of individuals. The failure of millions of people to save properly for their future is also a core problem of behavioral finance. (Shiller, 2006) According to (Glaser et al, 2003) there are two approaches towards Behavioral Finance, where both tend to have same goals. The goals tend to explain observed prices, Market trading Volume Last but not the least is the individual behavior better than traditional finance models. Belief Based Model: Psychology (Individual Behavior) Incorporates into Model Market prices Transaction Volume. It includes findings such as Overconfidence, Biased Self- Attrition, and Conservatism Representativeness. Preference Based Model: Rational Friction or from psychology Find explanations, Market detects irregularities individual behavior. It incorporates Prospect Theory, House money effect other forms of mental accounting. Behavioral Finance and Rational debate: The article by (Heaton and Rosenberg,2004) highlights the debate between the rational and behavioral model over testability and predictive success. And we find that neither of them actually offers either of these measures of success. The rational approach uses a particular type of rationalization methodology; which goes on to form the basis of behavior finance predictions. A closer look into the rational finance model goes on to show that it employs ex post rationalizations of observed price behaviors. This allows them greater flexibility when offering explanations for economic anomalies. On the other hand the behavior paradigm criticizes rationalizations as having no concrete role in predicting prices accurately, that utility functions, information sets and transaction costs cannot be `rationalized. Ironically they also reject the rational finances explanatory power which plays an essential role in the limits of arbitrage, which actually makes behavioral finance possible. Milton Friedmans theory lays the basis of positive economics. His methodology focuses on how to make a particular prediction; it is irrelevant whether a particular assumption is rational or irrational. According to this methodology, the rational finance model relies on a limited assumption space since all assumptions that are supposedly not rational have been eliminated. This is one of the major reasons behind the little success in rational finance predictions. Despite the minimal results, adherents of this model have criticized the behavioral model as lacking quantifiable predictions that are based on mathematical models. Rational finance has targeted a more important aspect in the structure of the economy, i.e. Investor uncertainty, which further cause financial anomalies. In explaining these assertions, the behavioural emphasises the importance of taking limits in arbitrage. Friedmans methodological approach falls into the category `instrumentalism, which basically states that theories are tools for predictions and used to draw inferences. Whether an assumption is realistic or rational is of no value to an instrumentalist. By narrowing what may or may not be possible, one will inevitably eliminate certain strategies or behaviors which might in fact go on to maximize utility or profits based on their uniqueness. An assumption could be irrational even in the long run, but it is continuously revised and refined to make it into something useful. In opposition to this, many individuals have gone on to say that behaviouralists are not bound by any constraints thus making their explanations systematically irrational. Rubinstein (2001) described how when everyone fails to explain a particular anomaly, suddenly a behavioral aspect to it will come up, because that can be based on completely abstract irrational assumptions. To support rationality, Rubinstein came up with two arguments. Firstly he went on to say that an irrational strategy that is profitable, will only attract copy cat firms or traders into the market. This is supported when a closer look is given towards limits to arbitrage. Secondly through the process of evolution, irrational decisions will eventually be eliminated in the long run. The major achievements characterized of the rational finance paradigm consist of the following: the principle of no arbitrage; market efficiency, the net present value decision rule, derivatives valuation techniques; Markowitzs (1952) mean-variance framework; event studies; multifactor models such as the APT, ICAPM, and the Consumption- CAPM. Despite the number of top achievements that supporters of the rational model claim, the paradigm fails to answer some of the most basic financial economic questions such as `What is the cost of capital for this firm? or `What is its optimal capital structure?; simply because of their self imposed constraints. So far this makes it seem like rational finance and behavioral finance are mutually exclusive. Contrary to this, they are actually interdependent, and overlap in several areas. Take for instance the concept of mispricing when there is no arbitrage. Behavior finance on the other hand suggests that this may not be the case; irrational assumptions in the market will still lead to mispricing. Further even though certain arbitrageurs may be able to identify irrationality induced mispricing, because of the imperfect market information, they are unable to convince investors of its existence. Over here, the rational model is accepting the existence of anomalies which are affected both through the factors of risk and chance; therefore coinciding with the perspective of behavioral finance. Two instances are clear examples of how rationalization is an important limit of arbitrage: i) the build-up and blow-up of the internet bubble; and ii) the superiority of value equity strategies. If we focus on the latter, we are able to see behavioral finance literature that highlights the superiority of such strategies in the ability of analysts to extrapolate results for investors. This is possible when rationalization is taken as a limit to arbitrage. Similarly these strategies may also limit arbitrage against mispricing, through the great risk associated with stocks. In explaining most anomalies it is essential that analysts first conclude whether pricing is rational or not. To prove their hypothesis that irrationality-induced mispricing exists, behaviouralists may find it easier if they accepted the role of rationalization in limits of arbitrage. Slow information diffusion and short-sales constraints are other factors that explain mispricing. However these factors alone cannot form the basis of a strong and concrete explanation that will clarify pricing across firms and also across time. Those supporting the rational paradigm attack behavioral finance adherents in that their predictions for the financial market have been made on irrational assumptions; that are not supported by concrete mathematical or scientific models. In their view the lack of concrete discipline in the methodology adopted in behavior finance leads to the lack of testing in their forecasts. On the other hand the rational model is criticized for its lack of success in financial predictions. The behaviouralists claim that this limitation exists because the supporters of rational finance dismiss aspects of the economic market simply because it may not fall into explainable rational behavior. Both perspectives claim to align themselves with respect to the goals of `testability and `predictions, while at the same time continue to offer evidence against the other model. In reality however, rather than being exclusively mutual both paradigms assist one another in making their predictions. A persons tendency to make errors is known as cognitive bias. These errors are based on the cognitive factors that include statistical judgments, social attribution and memory being common to all the humans in the world. (Crowell, 1994, p. 1) Cognitive bias is the tendency of intelligent, well-informed people to consistently do the wrong thing. The reason behind this cognitive bias is that the Human brain is made for interpersonal relationships and not for processing statistics. The paper discusses facility of forecasts. Generally it is said that the world is divided into two groups: People forecasting positively and people forecasting negatively. These forecasts exaggerate the reliability of their forecasts and trace it to the illusion of validity which exists even when the illusionary character is recognized. (Fisher and Statman, 2000) discussed five cognitive bias, underlying the illusion of validity that are Overconfidence, Confirmation, Representativeness, Anchoring, and Hindsig ht (Shiller, 2002) discusses, that irrational behavior may disappear with more learning and a much more structured situation. As the past research proves it that may of cognitive biases in human judgment value uncertainty will change, they may be convinced if given proper instructions, on the part-experience of irrational behavior. The three most common themes of behavioral finance are as follows: Heuristics, Framing Market Inefficiencies. People when decide on the basis of the rules of thumb regardless of rationalizing suffer from Heuristics. Some forms of Heuristics are: Prospect theory, Loss Aversion, Status quo Bias, Gamblers Fallacy, Self-serving bias and lastly Money illusion. Framing is basically the problem of decision making where the decision is based on the point where there is difference in how the case is presented to the decision maker. Cognitive framing Mental accounting Anchoring are the common forms of Framing 3. Market in efficiencies: As we found out that observed market outcomes are totally opposite to the rational expectations and the efficient market hypothesis. Mis pricing, irrational decision making and return anomalies are the examples of it. These terms have been described as specific market anomaly from a behavioral point of view. Anomaly (economic behavior) Disposition effect Endowment effect Inequity aversion Intertemporal consumption Present-biased preferences Momentum investing Greed and fear Herd behavior Anomalies (market prices and returns) Efficiency wage hypothesis Limits to arbitrage Dividend puzzle Equity premium puzzle Behavioral Economic Models are restricted to a certain observed market anomaly and it adjusts the neo classical models by explaining the phenomenon of Heuristics and framing to the decision makers. It is usually said that economics get along with in the neo classical framework, with just one restriction of the assumption of rationality. Loix et. Al in their paper Orientation towards Finances explains the individual financial management behavior, people dealing with their financial means. They have analyzed the Non-specific Financial behavior as already we see extensive research on the specific finance behavior such as saving, Taxation, Gambling, amassing debt. But they had given a lot of importance to stock market, investors and households. The analysis of general public`s behavior was done, where an ordinary man is not sure and simply act according to the guesses over their money related issues. It was also found that people interested in economic and financial matters are much more active in collecting specific information than general public, stating that financial behavior of household is an important relevant topic that needs to be discussed in much more details. Household financial management is similar to the financial management. The construct of orientation towards finances was developed where the individual ORTO FIN focuses on competencies (interest and skills). Having stronger money attitude is an indication of stronger orientation towards finances and much more effective competencies. Therefore we expect some relevance and similarity between corporate and household management behavior as both require organizing, forecasting, planning and control. (Loix et. Al, 2005) analyzed general publics behavior in basically dividing them into two groups, Financial Information Personal financial planning. Also explaining some practical and theoretical gaps in the area of psychology of money usage, they concluded that ORTOFIN (Orientation towards finance) indicates the involvement of individuals in managing their finances. Proving out the point that active interest in financial information and an urge to plan expenses are two main factors. A stronger ORTFIN indicates: Greater use of debit accounts, Higher savings account, Wide variety of investments, Greater awareness of ones financial Intimate knowledge of the details of Ones savings/deposit accounts obsessed by money, Higher achievement and power in monetary terms, Further age is also inversely proportional. Shiller in 2006, in his article talked about the co-evolution of neo-classical and behavior finance. In 1937 when A. Samuelsson one of the great economists wrote about people maximizing the present value of utility subject to a present vale budget constraint. Another judgment he realized was time being consistent human behavior where if at any time t 0 Where people reconsidered the problem of maximization from that date forward, they would not change their decision where as in real life it is totally opposite for example people sometimes try to control themselves by binding their future decision as from history we find out that that some of man make irrevocable trust in the taking out of life insurance as a compulsory savings measure. (shiller, 2006, p.) Considering personal saving rate, saving and down for no reason has emerged as a weakness of human self control. People seem to be vulnerable to complacency from time to time about providing for their own future. The distinction between neoclassical and behavioral finance have therefore been exaggerated. Both of them are not completely different from each other. Behavioral finance is more elastic willing to learn from other sciences and less concerned about the elegance of models whereby explaining human behavior. 4. Investing and cognitive bias: Money Managers and Money management is a very popular phenomenon. The performance in the stock market is measured at the daily basis and not to wait for a highly subjective annual review of ones performance by ones superior. Market grades you on a daily basis. The smarter one is, the more confident one becomes of ones ability to succeed, clients support them by trusting them that eventually helps their careers. But the truth is that few money managers put in sufficient amount of time and effort to figure out what works and develop a set of investment principles to guide their investment decisions (Browne, 2000). Further Browne discussed the importance of asset allocation and risk aversion, in order to understand why we do what we do regardless of whether it is rational or not. General public opts for money Managers to deal with their finances and these managers are categorized in three ways: Value Managers, Growth Managers and Market Neutral Managers. The vast majority of money manag ers are categorized as either value managers or growth managers although a third category, market neutral managers, is gaining popularity these days and may soon rival the so-called strategies of value and growth. Some investment management firms even are being cautious by offering all styles of investments. What too few money managers do is analyze the fundamental financial characteristics of portfolios that produce long-term market beating results, and develop a set of investment principles that are based on those findings. Difference of opinion on the definition of Value is the problem. The reasons for this are two-fold, one being the practical reality of managing large sums of money, and the other related to behavior. As the assets under management of an advisor grow, the universe of potential stocks shrinks. Analyzing that why individual and professional investors do not change their behavior even when they face empirical evidence, that suggests that their decisions are less th an optimal. An answer to this question is said to be that being a contrarian may simply be too risky for the average individual or professional. If a person is wrong on the collective basis, where everyone else also had made a mistake, the consequences professionally and for ones own self-esteem are far less than if a person is wrong alone. The herd instinct allows for the comfort of safety in numbers. The other reason is that individuals try to behave the same way and do not tend to change courses of action if they are happy. If the results are not too painful individuals can be happy with sub-optimal results. Moreover, individuals who tend to be unhappy make changes often and eventually end up being just as unhappy in their new circumstances. According to the traditional view of Investment management, fundamental forces drive markets, however many other investment firms considers to be active and working out based on their experienced Judgment. It is also believed that Judgmental overrides of Value Fundamental forces of markets can be lethal as well as a cause of Financial Disappointment. From the history it has been found that people Override at the wrong times and in most cases would be better off sticking to their investment disciplines (Crowell, 1994) and the reason to this behavior is the Cognitive bias. According to many researchers, stocks of small companies with low price/book ratios provide excess returns. Therefore, given a choice among small cheap stocks large high priced stocks, prominent investors (financial analysts, senior company executives and company directors) will certainly prefer the small cheap ones. But the fact is opposite to this situation where these prominent investors would opt for large high priced ones and so suffer from cognitive bias and further regret. According to a survey in 1992/1993, a research was carried out that included senior executives directors where they were suppose to rank companies in the similar industry ba sed on eight factors. Quality of Management, Quality of products services, Innovativeness, Long term Investment value, Financial soundness, Ability to attract, develop and keep talented people, Responsibility to the community and environment, Wise Use of Corporate assets. (Crowell, 1994). The assumptions that we made were that that Long term investment value should be negatively correlated with size since small stocks provide superior returns. Long term Investment value should have a negative correlation with Price/book since low Price/Book stocks provide superior returns. (Crowell, 1994). Whereas the results of the survey were contrary that stated that Long Term Investment had a positive correlation with the size and also that the Long term investment value had a positive correlation with the Price/Book stocks. According to Shefrin and statman, prominent investors overestimate the probability that a good company is a good stock, relying on the representative heuristics, concluding that superior companies make superior stocks. Aversion to Regret: aversion to regret is different from aversion to risk; Regret is acute when the individual must take responsibility for the final outcome. Aversion to regret leads to a preference for stocks of good companies. The choice of t he stocks of bad companies involves more personal responsibility and higher probability of regret. Therefore, we find there are two major Cognitive errors: We have a double cognitive error: good company always makes good stock (representativeness), and involves less responsibility(Less aversion to regret. (Crowell, 1994,p.3) The Anti Cognitive bias actions would be admitting to your owned stocks, admitting earlier investment mistakes. Further Taking the responsibility for the actions to improve their performance in the future. The reasons for all the available disciplines, tools, and quantitative techniques is to deal with the Cognitive bias error, where the quantitative investment techniques enables the investment managers to overcome cognitive bias, follow sound investment, and eventually be successful contrarian investor(one who rejects the majority opinion, as in economic matters). Behavioral finance also is very helpful in understanding justifying government involvement in the investing decisions of individuals. The failure of millions of people to save properly for their future is also a core problem of behavioral finance. With the help of two very important examples Shiller explains how Government involvement can influence financial investments of individuals. In April 2005 Tony Blair stated a program when all new born babies were given a birthday present of 250 to 500. The present were to choose among a number of investment alternatives to invest until child comes of age. This is an effect done in order to make the parents feel connected with investments and modern economy. Another example: as it is said that people should be heavily active in stock market when they are young and so generally should reduce the activity with age. According to the conventional rule people should have 100 Age = % age of investment. In 2005 president bush also portfolio announced one such plan for personal account life cycle fund which would be among the option that works will be offered to invest their personal account. It was A centerpiece of the presidents proposal bur a major point to be noticed was the default option. An important aspect of behavioral finance is the human attention is capricious focuses heavily that same times on financial calculations and are subject to distraction and dissipation of default option is central. All this brings us a question that what should an intertemporal optimizer do to manage his portfolio over the lifetime. According to Samuelson someone who wished to maximize the expected value of his intertemporal utility function by managing the allocation of the portfolio between a high yielding asset and less yielding asset would not actually change the allocation through time. Neoclassic finance appears highly relevant to such a discussion in that it offers the appropriate theor etical framework for considering what people ought to do with the portfolio if not what they actually do. Behavioral is beginning to play an important role in public policy such as in social security reforms. 5. Agents Rationality: Global culture Social Contagion: The selective attention exhibited by a human mind is the concept of culture. Every nation, tribe or asocial group has a social cognition reinforced by conversation ritual and symbols, rituals and supposition of a particular nation has a subtle but far reliability affect on human behavior. Some researchers found that the unique customs of people basically appears as a logical outcome of a belief system of a nation group of people. The Cultural factors were one of the major influences on rational or irrational behavior. We find many factors that are same across countries , e.g fashion, music, movies, youthful rebelliou Behavioural Finance Theory Dissertation Behavioural Finance Theory Dissertation A survey of behavioral finance 1. Introduction: The Modern investment theory and its application is predicated on the Efficient Markets Hypothesis (EMH), the assumption that markets fully and instantaneously integrate all available information into market prices. Underlying this comprehensive idea is the assumption that the market participants are perfectly rational, and always act in self-interest, making optimal decisions. These assumptions have been challenged. It is difficult to tip over the Neo classical convention that has yielded such insights as portfolio optimization, the Capital Asset Pricing Model, the Arbitrage Pricing Theory, the Cox Ingersoll-Ross theory of the term structure of interest rates, and the Black-Scholes/Merton option pricing model, all of which are predicated on the EMH (Efficient Market Hypothesis) in one way or another. At few points the EMH criticizes the existing literature of behavioral finance, which shows the difference of opinion on psychology economics. The field of psychology has its roots in empirical observation, controlled experimentation, and clinical applications. According to psychology, behavior is the main entity of study, and only after controlled experimental dimensions do psychologists attempt to make inferences about the origins of such behavior. On the contrary, economists typically derive behavior axiomatically from simple principles such as expected utility maximization, making it easier for us to predict economic behavior that are routinely refuted empirically The biggest threats to Modern Portfolio theory is the theory of Behavioral Finance. It is an analysis of why investors make irrational decisions with respect to their money, normal distribution of expected returns generally appears to be invalid and also that the investors support upside risks rather than downside risks. The theory of Behavioral finance is opposite to the traditional theory of Finance which deals with human emotions, sentiments, conditions, biases on collective as well as individual basis. Behavior finance theory is helpful in explaining the past practices of investors and also to determine the future of investors. Behavioral finance is a concept of finance which deals with finances incorporating findings from psychology sociology. It is reviewed that behavioral finance is generally based on individual behavior or on the implication for financial market outcomes. There are many models explaining behavioral finance that explains investors behavior or market irregularities where the rational models fail to provide adequate information. We do not expect such a research to provide a method to make lots of money from the inefficient financial market very fast. Behavioral finance has basically emerged from the theories of psychology, sociology and anthropology the implications of these theories appear to be significant for the efficient market hypothesis, that is based on the positive notion that people behave rationally, maximize their utility and are able to prices observation, a number of anomalies (irregularities) have appeared, which in turn suggest that in the efficient market the principle of rational behavior is not always correct. So, the idea of analyzing other model of human behavior has came up. Further (Gervais, 2001) explained the concept where he says that People like to relate to the stock market as a person having different moods, it can be bad-tempered or high-spirited, it overreacts one day and behaves very normally the other day. As we know that human behavior is unpredictable and it behaves differently in different situations. Lately many researchers have suggested the idea that psychological analysis of investors may be very helpful in understanding the financial markets better. To do so it is important to understand the behavioral finance presenting the concept that The traditional theory has overestimated the rationality of investors , their biases in decisions casting a cumulative impact on asset prices. To many researchers the study of behavior in finance appeared to be a revolution. As it transforms peoples mentality and perception about the markets and factors that influence the markets. â€Å"The paradigm is shifting. People are continuing to walk across th e border from the traditional to the behavioral camp†. (Gervais, 2001, P.2). On the contrary some people believe that may be its too early call it a revolution. Eugene Fama( Gervais, 2001) argued that Behavioral finance has not really shown impacts on the world prices, and the models contradict each other on different point of times. Giving very less account to the behaviorist explanations of trends and the irregularities †anomaly† (any occurrence or object that is strange, unusual, or unique) Also argued that in order to locate the patterns the data mining techniques are much helpful.. Other researchers have also criticized the idea that the behavioral finance models tend to replace the traditional models of market functions. The weaknesses in this area, explained by him (Gervais, 2001) are that generally overreaction and under reaction are the major causes of the market behavior. Where People take the behavior that seems to be easy for the particular study regardless of the fact that whether these biases are either primary factor of economic forces or not. Secondly, Lack of trained and expert people. The field does not have enough trained professionals both in the psychology or finance fields and therefore as a result the models presented is being put up together are improvised. David Hirshleifer (Gervais, 2001) focuses on the individual behavior impacting asset prices and explaining that the field of behavioral finance is currently in its developmental stage, in its way of development it is facing a lot of disagreement which itself is a productive one. Hirshleifer points out that if we apply the conceptual models of behavioral finance to the corporate finance, it can majorly pay off. If the money managers are incorrectly rational, that means that they are probably not evaluating their investment strategies correctly. They might take wrong decisions in their capital structure decisions. It has been found that quite a few people foresee behavioral finance displacing the age old Efficient Markets theory. On the contrary the underlying assumption that the investors and the managers are completely rational makes insightful sense to many people. 2. Traditional Finance Empirical Evidence: Traditional theory assumes that agents are rational the law of one price holds that is a perfect scenario. Where the law of One price states that securities with the same pay off have same price, but in real world this law is violated when people purchase securities in one market for immediate resale in another, in search of higher profits because of price differentials known as Arbitrageurs. And the agents rationality explains the behavior of investor Professional Individual which is generally inconsistent with the rationality or the future predictions. If a market achieves a perfect scenario where agents are rational law of one price holds then the market is efficient. With the availability of amount of information, the form of market changes. It is unlikely that market prices contain all private information. The presence of noise traders (traders, trading randomly not based on information). Researches show that stock returns are typically unpredictable based on past returns wh ere as future returns are predictable to some extent. Few examples from the past literature explains the problem of irrationality which occurs because of naive diversification, behavior influenced by framing, the tendency of investors of committing systematic errors while evaluating public information.(Glaser et al, 2003) Recent studies suggest that peoples` attitude towards the riskiness of a stock in future the individual interpretation may explain the higher level trading volume, which itself is a vast topic for insight. A problem of perception exist in the investors that Stocks have a higher risk adjusted returns than bonds. Another issue with the investors is that these investors either care about the whole stock portfolio or just about the value of each single security in their portfolio and thus ignore the correlations. The concept of ownership society has been promoted in the recent years where people can take better care of their own lives and be better citizen too if they are both owner of financial assets and homeowners. As a researcher suggested that in order to improve the lives of less advantaged in our society is to teach them how to be capitalist, In order to put the ownership society in its right perspective, behavioral finance is needed to be understood. The ownership society seems very attractive when people appear to make profits from their investments. Behavioral finance also is very helpful in understanding justifying government involvement in the investing decisions of individuals. The failure of millions of people to save properly for their future is also a core problem of behavioral finance. (Shiller, 2006) According to (Glaser et al, 2003) there are two approaches towards Behavioral Finance, where both tend to have same goals. The goals tend to explain observed prices, Market trading Volume Last but not the least is the individual behavior better than traditional finance models. Belief Based Model: Psychology (Individual Behavior) Incorporates into Model Market prices Transaction Volume. It includes findings such as Overconfidence, Biased Self- Attrition, and Conservatism Representativeness. Preference Based Model: Rational Friction or from psychology Find explanations, Market detects irregularities individual behavior. It incorporates Prospect Theory, House money effect other forms of mental accounting. Behavioral Finance and Rational debate: The article by (Heaton and Rosenberg,2004) highlights the debate between the rational and behavioral model over testability and predictive success. And we find that neither of them actually offers either of these measures of success. The rational approach uses a particular type of rationalization methodology; which goes on to form the basis of behavior finance predictions. A closer look into the rational finance model goes on to show that it employs ex post rationalizations of observed price behaviors. This allows them greater flexibility when offering explanations for economic anomalies. On the other hand the behavior paradigm criticizes rationalizations as having no concrete role in predicting prices accurately, that utility functions, information sets and transaction costs cannot be `rationalized. Ironically they also reject the rational finances explanatory power which plays an essential role in the limits of arbitrage, which actually makes behavioral finance possible. Milton Friedmans theory lays the basis of positive economics. His methodology focuses on how to make a particular prediction; it is irrelevant whether a particular assumption is rational or irrational. According to this methodology, the rational finance model relies on a limited assumption space since all assumptions that are supposedly not rational have been eliminated. This is one of the major reasons behind the little success in rational finance predictions. Despite the minimal results, adherents of this model have criticized the behavioral model as lacking quantifiable predictions that are based on mathematical models. Rational finance has targeted a more important aspect in the structure of the economy, i.e. Investor uncertainty, which further cause financial anomalies. In explaining these assertions, the behavioural emphasises the importance of taking limits in arbitrage. Friedmans methodological approach falls into the category `instrumentalism, which basically states that theories are tools for predictions and used to draw inferences. Whether an assumption is realistic or rational is of no value to an instrumentalist. By narrowing what may or may not be possible, one will inevitably eliminate certain strategies or behaviors which might in fact go on to maximize utility or profits based on their uniqueness. An assumption could be irrational even in the long run, but it is continuously revised and refined to make it into something useful. In opposition to this, many individuals have gone on to say that behaviouralists are not bound by any constraints thus making their explanations systematically irrational. Rubinstein (2001) described how when everyone fails to explain a particular anomaly, suddenly a behavioral aspect to it will come up, because that can be based on completely abstract irrational assumptions. To support rationality, Rubinstein came up with two arguments. Firstly he went on to say that an irrational strategy that is profitable, will only attract copy cat firms or traders into the market. This is supported when a closer look is given towards limits to arbitrage. Secondly through the process of evolution, irrational decisions will eventually be eliminated in the long run. The major achievements characterized of the rational finance paradigm consist of the following: the principle of no arbitrage; market efficiency, the net present value decision rule, derivatives valuation techniques; Markowitzs (1952) mean-variance framework; event studies; multifactor models such as the APT, ICAPM, and the Consumption- CAPM. Despite the number of top achievements that supporters of the rational model claim, the paradigm fails to answer some of the most basic financial economic questions such as `What is the cost of capital for this firm? or `What is its optimal capital structure?; simply because of their self imposed constraints. So far this makes it seem like rational finance and behavioral finance are mutually exclusive. Contrary to this, they are actually interdependent, and overlap in several areas. Take for instance the concept of mispricing when there is no arbitrage. Behavior finance on the other hand suggests that this may not be the case; irrational assumptions in the market will still lead to mispricing. Further even though certain arbitrageurs may be able to identify irrationality induced mispricing, because of the imperfect market information, they are unable to convince investors of its existence. Over here, the rational model is accepting the existence of anomalies which are affected both through the factors of risk and chance; therefore coinciding with the perspective of behavioral finance. Two instances are clear examples of how rationalization is an important limit of arbitrage: i) the build-up and blow-up of the internet bubble; and ii) the superiority of value equity strategies. If we focus on the latter, we are able to see behavioral finance literature that highlights the superiority of such strategies in the ability of analysts to extrapolate results for investors. This is possible when rationalization is taken as a limit to arbitrage. Similarly these strategies may also limit arbitrage against mispricing, through the great risk associated with stocks. In explaining most anomalies it is essential that analysts first conclude whether pricing is rational or not. To prove their hypothesis that irrationality-induced mispricing exists, behaviouralists may find it easier if they accepted the role of rationalization in limits of arbitrage. Slow information diffusion and short-sales constraints are other factors that explain mispricing. However these factors alone cannot form the basis of a strong and concrete explanation that will clarify pricing across firms and also across time. Those supporting the rational paradigm attack behavioral finance adherents in that their predictions for the financial market have been made on irrational assumptions; that are not supported by concrete mathematical or scientific models. In their view the lack of concrete discipline in the methodology adopted in behavior finance leads to the lack of testing in their forecasts. On the other hand the rational model is criticized for its lack of success in financial predictions. The behaviouralists claim that this limitation exists because the supporters of rational finance dismiss aspects of the economic market simply because it may not fall into explainable rational behavior. Both perspectives claim to align themselves with respect to the goals of `testability and `predictions, while at the same time continue to offer evidence against the other model. In reality however, rather than being exclusively mutual both paradigms assist one another in making their predictions. A persons tendency to make errors is known as cognitive bias. These errors are based on the cognitive factors that include statistical judgments, social attribution and memory being common to all the humans in the world. (Crowell, 1994, p. 1) Cognitive bias is the tendency of intelligent, well-informed people to consistently do the wrong thing. The reason behind this cognitive bias is that the Human brain is made for interpersonal relationships and not for processing statistics. The paper discusses facility of forecasts. Generally it is said that the world is divided into two groups: People forecasting positively and people forecasting negatively. These forecasts exaggerate the reliability of their forecasts and trace it to the illusion of validity which exists even when the illusionary character is recognized. (Fisher and Statman, 2000) discussed five cognitive bias, underlying the illusion of validity that are Overconfidence, Confirmation, Representativeness, Anchoring, and Hindsig ht (Shiller, 2002) discusses, that irrational behavior may disappear with more learning and a much more structured situation. As the past research proves it that may of cognitive biases in human judgment value uncertainty will change, they may be convinced if given proper instructions, on the part-experience of irrational behavior. The three most common themes of behavioral finance are as follows: Heuristics, Framing Market Inefficiencies. People when decide on the basis of the rules of thumb regardless of rationalizing suffer from Heuristics. Some forms of Heuristics are: Prospect theory, Loss Aversion, Status quo Bias, Gamblers Fallacy, Self-serving bias and lastly Money illusion. Framing is basically the problem of decision making where the decision is based on the point where there is difference in how the case is presented to the decision maker. Cognitive framing Mental accounting Anchoring are the common forms of Framing 3. Market in efficiencies: As we found out that observed market outcomes are totally opposite to the rational expectations and the efficient market hypothesis. Mis pricing, irrational decision making and return anomalies are the examples of it. These terms have been described as specific market anomaly from a behavioral point of view. Anomaly (economic behavior) Disposition effect Endowment effect Inequity aversion Intertemporal consumption Present-biased preferences Momentum investing Greed and fear Herd behavior Anomalies (market prices and returns) Efficiency wage hypothesis Limits to arbitrage Dividend puzzle Equity premium puzzle Behavioral Economic Models are restricted to a certain observed market anomaly and it adjusts the neo classical models by explaining the phenomenon of Heuristics and framing to the decision makers. It is usually said that economics get along with in the neo classical framework, with just one restriction of the assumption of rationality. Loix et. Al in their paper Orientation towards Finances explains the individual financial management behavior, people dealing with their financial means. They have analyzed the Non-specific Financial behavior as already we see extensive research on the specific finance behavior such as saving, Taxation, Gambling, amassing debt. But they had given a lot of importance to stock market, investors and households. The analysis of general public`s behavior was done, where an ordinary man is not sure and simply act according to the guesses over their money related issues. It was also found that people interested in economic and financial matters are much more active in collecting specific information than general public, stating that financial behavior of household is an important relevant topic that needs to be discussed in much more details. Household financial management is similar to the financial management. The construct of orientation towards finances was developed where the individual ORTO FIN focuses on competencies (interest and skills). Having stronger money attitude is an indication of stronger orientation towards finances and much more effective competencies. Therefore we expect some relevance and similarity between corporate and household management behavior as both require organizing, forecasting, planning and control. (Loix et. Al, 2005) analyzed general publics behavior in basically dividing them into two groups, Financial Information Personal financial planning. Also explaining some practical and theoretical gaps in the area of psychology of money usage, they concluded that ORTOFIN (Orientation towards finance) indicates the involvement of individuals in managing their finances. Proving out the point that active interest in financial information and an urge to plan expenses are two main factors. A stronger ORTFIN indicates: Greater use of debit accounts, Higher savings account, Wide variety of investments, Greater awareness of ones financial Intimate knowledge of the details of Ones savings/deposit accounts obsessed by money, Higher achievement and power in monetary terms, Further age is also inversely proportional. Shiller in 2006, in his article talked about the co-evolution of neo-classical and behavior finance. In 1937 when A. Samuelsson one of the great economists wrote about people maximizing the present value of utility subject to a present vale budget constraint. Another judgment he realized was time being consistent human behavior where if at any time t 0 Where people reconsidered the problem of maximization from that date forward, they would not change their decision where as in real life it is totally opposite for example people sometimes try to control themselves by binding their future decision as from history we find out that that some of man make irrevocable trust in the taking out of life insurance as a compulsory savings measure. (shiller, 2006, p.) Considering personal saving rate, saving and down for no reason has emerged as a weakness of human self control. People seem to be vulnerable to complacency from time to time about providing for their own future. The distinction between neoclassical and behavioral finance have therefore been exaggerated. Both of them are not completely different from each other. Behavioral finance is more elastic willing to learn from other sciences and less concerned about the elegance of models whereby explaining human behavior. 4. Investing and cognitive bias: Money Managers and Money management is a very popular phenomenon. The performance in the stock market is measured at the daily basis and not to wait for a highly subjective annual review of ones performance by ones superior. Market grades you on a daily basis. The smarter one is, the more confident one becomes of ones ability to succeed, clients support them by trusting them that eventually helps their careers. But the truth is that few money managers put in sufficient amount of time and effort to figure out what works and develop a set of investment principles to guide their investment decisions (Browne, 2000). Further Browne discussed the importance of asset allocation and risk aversion, in order to understand why we do what we do regardless of whether it is rational or not. General public opts for money Managers to deal with their finances and these managers are categorized in three ways: Value Managers, Growth Managers and Market Neutral Managers. The vast majority of money manag ers are categorized as either value managers or growth managers although a third category, market neutral managers, is gaining popularity these days and may soon rival the so-called strategies of value and growth. Some investment management firms even are being cautious by offering all styles of investments. What too few money managers do is analyze the fundamental financial characteristics of portfolios that produce long-term market beating results, and develop a set of investment principles that are based on those findings. Difference of opinion on the definition of Value is the problem. The reasons for this are two-fold, one being the practical reality of managing large sums of money, and the other related to behavior. As the assets under management of an advisor grow, the universe of potential stocks shrinks. Analyzing that why individual and professional investors do not change their behavior even when they face empirical evidence, that suggests that their decisions are less th an optimal. An answer to this question is said to be that being a contrarian may simply be too risky for the average individual or professional. If a person is wrong on the collective basis, where everyone else also had made a mistake, the consequences professionally and for ones own self-esteem are far less than if a person is wrong alone. The herd instinct allows for the comfort of safety in numbers. The other reason is that individuals try to behave the same way and do not tend to change courses of action if they are happy. If the results are not too painful individuals can be happy with sub-optimal results. Moreover, individuals who tend to be unhappy make changes often and eventually end up being just as unhappy in their new circumstances. According to the traditional view of Investment management, fundamental forces drive markets, however many other investment firms considers to be active and working out based on their experienced Judgment. It is also believed that Judgmental overrides of Value Fundamental forces of markets can be lethal as well as a cause of Financial Disappointment. From the history it has been found that people Override at the wrong times and in most cases would be better off sticking to their investment disciplines (Crowell, 1994) and the reason to this behavior is the Cognitive bias. According to many researchers, stocks of small companies with low price/book ratios provide excess returns. Therefore, given a choice among small cheap stocks large high priced stocks, prominent investors (financial analysts, senior company executives and company directors) will certainly prefer the small cheap ones. But the fact is opposite to this situation where these prominent investors would opt for large high priced ones and so suffer from cognitive bias and further regret. According to a survey in 1992/1993, a research was carried out that included senior executives directors where they were suppose to rank companies in the similar industry ba sed on eight factors. Quality of Management, Quality of products services, Innovativeness, Long term Investment value, Financial soundness, Ability to attract, develop and keep talented people, Responsibility to the community and environment, Wise Use of Corporate assets. (Crowell, 1994). The assumptions that we made were that that Long term investment value should be negatively correlated with size since small stocks provide superior returns. Long term Investment value should have a negative correlation with Price/book since low Price/Book stocks provide superior returns. (Crowell, 1994). Whereas the results of the survey were contrary that stated that Long Term Investment had a positive correlation with the size and also that the Long term investment value had a positive correlation with the Price/Book stocks. According to Shefrin and statman, prominent investors overestimate the probability that a good company is a good stock, relying on the representative heuristics, concluding that superior companies make superior stocks. Aversion to Regret: aversion to regret is different from aversion to risk; Regret is acute when the individual must take responsibility for the final outcome. Aversion to regret leads to a preference for stocks of good companies. The choice of t he stocks of bad companies involves more personal responsibility and higher probability of regret. Therefore, we find there are two major Cognitive errors: We have a double cognitive error: good company always makes good stock (representativeness), and involves less responsibility(Less aversion to regret. (Crowell, 1994,p.3) The Anti Cognitive bias actions would be admitting to your owned stocks, admitting earlier investment mistakes. Further Taking the responsibility for the actions to improve their performance in the future. The reasons for all the available disciplines, tools, and quantitative techniques is to deal with the Cognitive bias error, where the quantitative investment techniques enables the investment managers to overcome cognitive bias, follow sound investment, and eventually be successful contrarian investor(one who rejects the majority opinion, as in economic matters). Behavioral finance also is very helpful in understanding justifying government involvement in the investing decisions of individuals. The failure of millions of people to save properly for their future is also a core problem of behavioral finance. With the help of two very important examples Shiller explains how Government involvement can influence financial investments of individuals. In April 2005 Tony Blair stated a program when all new born babies were given a birthday present of 250 to 500. The present were to choose among a number of investment alternatives to invest until child comes of age. This is an effect done in order to make the parents feel connected with investments and modern economy. Another example: as it is said that people should be heavily active in stock market when they are young and so generally should reduce the activity with age. According to the conventional rule people should have 100 Age = % age of investment. In 2005 president bush also portfolio announced one such plan for personal account life cycle fund which would be among the option that works will be offered to invest their personal account. It was A centerpiece of the presidents proposal bur a major point to be noticed was the default option. An important aspect of behavioral finance is the human attention is capricious focuses heavily that same times on financial calculations and are subject to distraction and dissipation of default option is central. All this brings us a question that what should an intertemporal optimizer do to manage his portfolio over the lifetime. According to Samuelson someone who wished to maximize the expected value of his intertemporal utility function by managing the allocation of the portfolio between a high yielding asset and less yielding asset would not actually change the allocation through time. Neoclassic finance appears highly relevant to such a discussion in that it offers the appropriate theor etical framework for considering what people ought to do with the portfolio if not what they actually do. Behavioral is beginning to play an important role in public policy such as in social security reforms. 5. Agents Rationality: Global culture Social Contagion: The selective attention exhibited by a human mind is the concept of culture. Every nation, tribe or asocial group has a social cognition reinforced by conversation ritual and symbols, rituals and supposition of a particular nation has a subtle but far reliability affect on human behavior. Some researchers found that the unique customs of people basically appears as a logical outcome of a belief system of a nation group of people. The Cultural factors were one of the major influences on rational or irrational behavior. We find many factors that are same across countries , e.g fashion, music, movies, youthful rebelliou

Friendship in Wordsworths Tintern Abbey :: English Literature Essays

Friendship in Wordsworth's Tintern Abbey Of all the topics Wordsworth covered in his poetic lifetime, friendship stands out as a key occupation. His own personal friendship with Coleridge led to the co-writing of Lyrical Ballads in 1789. The poem â€Å"On Friendship,† written to Keats after an argument in 1854, states, â€Å"Would that we could make amends / And evermore be better friends.† In â€Å"Lines Written a Few Miles Above Tintern Abbey,† we find the purest expression of Wordsworth’s fascination with friendship. Written on the banks of the Lye, this beautiful lyric has been said by critic Robert Chinchilla to â€Å"pose the question of friendship in a way more central, more profound, than any other poem of Wordsworth’s since ‘The Aeolian Harp’ of 1799† (245). Wordsworth is writing the poem to his sister Rebecca as a way of healing their former estrangement. Rebecca Wordsworth was, as many writers have pointed out, distressed at Wordsworth’s refusal to hold a full-time job—like many a youth after him, Wordsworth was living the carefree life of the artist. Rebecca wanted him put to rights. He should become an adult now. â€Å"Tintern Abbey† is Wordsworth’s attempt to explain himself to Rebecca, but also, in crucial ways, to himself. As the poem opens, Wordsworth is standing a few miles above the ruined Tintern Abbey. He states: Five years have past; five summers, with the length Of five long winters! and again I hear These waters, rolling from their mountain-springs With a soft island murmur. Despite his position, Wordsworth can hear the â€Å"soft island murmur† of the mountain springs. As â€Å"five long winters† suggests, Wordsworth is cold and dreary—London, we must remember, is a bitter place. He longs for the islands: the sand, sun, and warm waters that those murmurs suggest. The coldness of winter could be brought about by Rebecca’s distance from her brother; they had been, at the time of the poem’s writing, separate for five long years. But he can hear reconciliation coming just at the edge of hearing: he can spot the horizon of friendship. But no sooner does friendship appear in the poem than it is thwarted by these lines: Green to the very door; and wreaths of smoke Sent up, in silence, from among the trees! With some uncertain notice, as might seem Of vagrant dwellers in the houseless woods, Or of some Hermit's cave, where by his fire The Hermit sits alone.

Problems facing india Essay

THE rupee’s tumble continues to grip India. On August 29th Duvvuri Subbarao, the departing boss of the central bank, told an audience in Mumbai of the widespread â€Å"dismay about the ferocity of the depreciation†. Today, on August 30th, I spoke to the boss of a big hotel in the city who says he is preparing to dollarise his business. The rupee is too flaky to operate in, he said. â€Å"It’s just like Russia and Indonesia in the 1990s.† Shortly after this, Manmohan Singh, the prime minister, addressed parliament on the matter. While part of the currency slump is a â€Å"natural† correction to reflect high inflation, he said, â€Å"foreign exchange markets have a notorious history of overshooting. Unfortunately this is what is happening†. That statement looks correct on a three-day time horizon. The rupee almost breached 69 per dollar earlier this week. On August 30th it bounced back to 65.7, making it the best-performing big currency worldwide that day, though still leaving it down 16% year-to-date. The vote by Britain’s parliament against military action in Syria has helped push down oil prices. That is helpful for India, a big energy importer. And some of the Reserve Bank of India’s tweaks have calmed nerves. On August 28th the central bank said it would provide dollars directly to India’s big oil-importing firms. That will stop them having to sell rupees in the spot market. It is an indirect way for the RBI to use its reserves to support the exchange rate. Whether India’s currency has stabilised is another matter. There is plenty to worry about. The prospect of the Federal Reserve ending its purchases of bonds draws ever closer, especially with good news from the American economy this week. That means the â€Å"Great Exit† of money from emerging markets may continue. Both Indonesia and Brazil raised interest rates this week to protect their currencies, making India relatively less attractive. A foreign  investor in town told me at he would not invest in India until it raised its rates. He had arrived in India expecting to allocate more funds to it now prices have fallen, but after several days he felt more pessimistic and reckoned that the slump had further to go. As if to confirm that view, GDP figures were released on August 30th for the quarter to June. Growth slowed to 4.4%, from 4.8% in the preceding quarter. Manufacturing contracted. These figures do not yet reflect the credit crunch that has taken place over the last two months, so it seems likely that GDP growth will slow even further. A good monsoon may boost farming, but the formal, industrial bit of the economy is in dire condition. On August 27th Palaniappan Chidambaram, the finance minister, said that the government had fast-tracked $27 billion of power and other projects stuck in red tape. But I have yet to find a full account of these proposals. In the past such announcements have contained far more hype than substance, as we explained in an article in June. That credit crunch is still pronounced, even if the rupee has recovered a little. Most measures of stress in the financial system are still flashing red, reflecting Indian banks’ bad debt problem. Credit default swaps on State Bank of India, which measure its risk, have soared. Short-term market interest rates have not come down. The government has yet to show much desire to clean up banks’ dud loans and is instead putting more pressure on them to â€Å"extend and pretend†. Even as mayhem stalks the currency market, the election campaign is ramping up. India’s legislators may be lousy at making decisions about economic reform, but they are remarkably decisive at passing more populist measures. Early this week a new programme to increase food subsidies was agreed. Moody’s, a credit rating agency, warned that this will put more pressure on the public finances. Then the lower house of parliament approved a new law on land reform. It replaces a decrepit act that is over a century old. But businesses say the new rules will make it even harder to buy land to set up factories, with long delays becoming the norm. If the rupee still looks vulnerable, India has three options, none very palatable. One is to let the currency fall further. In most countries a cheaper currency would boost exports and help close the current-account deficit. But India’s manufacturing industry is too small and too bound in red tape to ramp up quickly. So a turn-around in the balance of payments may take time during which investors could panic. Meanwhile the weaker currency may  destabilise the domestic economy by adding to inflation and increasing the government’s subsidies on fuel and thus its borrowing. The second option is to do the opposite and increase interest rates to attract more foreign money in, following the path of Indonesia and Brazil. But this would further hammer Indian industry, which is already in poor shape, and probably increase bad debts at banks too. If the economy slowed further as a result, equity investors might begin to worry about corporate earnings declining and pull out their roughly $200 billion of investments in listed shares. Inducing a credit crunch in India might make things even worse. The last option is to lower government borrowing. It is running at 7% of GDP (including India’s states) and has stoked excess demand in the last few years, widening the current-account deficit. The populist political mood doesn’t make big spending cuts easy, though, and while it is often accused of epic profligacy, India’s central government has pretty low expenditure relative to GDP—about 15%. There is simply no way it can cut its way to a balanced budget. What India really needs is more tax revenues. But with a narrow tax base—only 3% of Indians pay income tax—this might mean concentrating tax rises on the formal economy, which is already reeling. For now my sense is that the authorities’ plan is to let the rupee trade freely but hold out the threat of an interest rate rise or direct intervention in the currency market to try to scare off speculators. At the same time they will squeeze borrowing as much as is possible during an election and use administrative measures, such as highe r duties, to try to cap imports. It is a bet that the economy will pick up soon and that growth will make India’s problems fade away. The trouble is that the economy is still decelerating.

The Effects Of Sexual Assault On College Campuses

A common worry of female freshman is the threat of sexual assault victimization on her college campus. Although the emotional treatment of sexual victimization is prevalent on campuses nationwide, research has neglected to explore the effect the assault has on academic performance (Faravelli, Guigni, Salvatori, Ricci, 2004). Can being sexually victimized within the first or second semester of a female’s freshman year of college negatively impact academic performance? Current research has shown that several feelings such as shock and confusion immediately after the assault can later lead to posttraumatic stress disorder, depression, and suicide as some of the long-term effects (Faravelli, Guigni, Salvatori, Ricci, 2004). These emotional problems can inflict extreme stress on the student, preventing them from fully focusing on academics and in turn can lead to a lower GPA. Sexual assault on college campuses is a major occurrence. Rape, and other forms of sexual assault are common throughout any part of the world. However, studies show that women who attend higher education institutions are at a greater risk of experiencing sexual assault (Fisher, B. S., Cullen, F. T., Turner, M. G. (2000). In this same study, it concludes that in a college with 10,000 female students, more than 350 rapes will occur per year (Fisher, B. S., Cullen, F. T., Turner, M. G. (2000). It can also be observed that rates of sexual assault are relatively even across all races (Smith, P.H., White,Show MoreRelatedThe Effects Of Sexual Assaults On College Campuses2563 Words   |  11 PagesBrittany Hull Professor Nelson English 1B 19 May 2016 It’s on Us On college campuses across the nation, more sexual assaults have begun to surface, but only a few of these assaults get attention. Sexual assaults can be a very touchy subject meaning that a lot of people, friends and even college counselors or therapists advise the victims not to speak up about the incident. I believe that most of the time administration tries to protect the attacker rather than look out for the victim. BecauseRead MoreThe Effects Of Sexual Assault On College Campuses Essay890 Words   |  4 Pagesforming the ‘White House Task Force to Protect Students from Sexual Assault.’ This task force was established to help decrease sexual assaults in college campuses and create awareness of this little talked about topic. Many college students don’t believe sexual assault is an issue until it happens to them or someone they’re close with. Sexual assault affects the victims by making them feel helpless and causing serious negative effects on their emotional health. 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While there are several steps already in place to help lower this statistic there are additional things that can be done to help reduce the rate ofRead MoreThe Effects Of Sexual Assault On College Campuses2417 Words   |  10 PagesLook around at four of your female friends; according to â€Å"Not Al one,† a US Government report on sexual assault, by the time you graduate college, one of you will become a victim of sexual assault. For years, schools have struggled with figuring out how to handle this epidemic. Many schools just don’t focus on sexual assault; for example, according to Rolling Stone’s article, Rolling Stone and UVA: The Columbia University Graduate School of Journalism Report by Sheila Coronel, Steve Coll, and DerekRead MoreThe Effects Of Binge Drinking And Sexual Assault On College Campuses1411 Words   |  6 PagesThe United States is a country of freedom. Most of people can find their lives which they want. Especially, the college students can join in some activates and clubs. Their campus lives are always fulfilling. However, there are still some dangers among the campus, and most is from the students themselves. Recent survey estimates provided by Fisher, Cullen, and Turner (2000) revealed that for every 1,000 women attending institutions of higher education, there may well be 35 incidents of rape in aRead MoreSexual Assault On College Campuses998 Words   |  4 PagesWebster defines sexual assault as an illegal sexual contact that usually involves force upon a person without consent or is inflicted upon a person who is incapable of giving consent or who places the assailant in a position of trust or authority. Most common types of sexual assault are â€Å"acquaintance rape† and â€Å"date rape†, which both take place on college campuses but go unnoticed. There are several incidents that occur on college campuses that students that attend that particular college or universityRead MoreSexual Assault On College Campuses Is An Increasingly Serious1620 Words   |  7 PagesSexual assault on college campuses is an increasingly serious issue in The United States. Approximately 25% of female college students will experience a sexual assault by the time they graduate, and many of them will not report their a ttack (Perez-Pena, 2015). This has come to the nation’s attention, and multiple interventions have been put in place to try and reduce the number of sexual assaults. One of these programs is the Bystander Intervention Program, which helps educate individuals so thatRead MoreSexual Assault On College Campuses1314 Words   |  6 PagesIn the last few years, the issue of sexual assault on college campuses have been gaining popularity in the public. Campus sexual assault have been a recurring subject throughout history and it seems to only get bigger. People would think that college campuses will be safe due to the advance security on the campus. Hundreds of women and men are sexually assaulted on campus everyday. Many organizations have started to form in order to help victims and prevent such tragic, heinous acts from happening

The Invention Of A Flint Lock - 1377 Words

From the iconic AK-47 to the lesser know guns have been with man since the 10th century when the Chinese invented the fire lance (â€Å"Jeff Harder†). A simple hollow tube made of bamboo or metal loaded with gunpowder and shrapnel that would be fired. Later on in the 13th century the first cannons were in production and used by European countries (â€Å"Jeff Harder†). Following the invention of a flint lock in the 15th century guns similar to those used in the French and Indian Wars were produced (â€Å"Jeff Harder†). Theses firearms began to replace the older weapons such as swords, bows or spears because of it was more economic. It costed lots of money to train a soldier to use a sword or a bow and arrow. As guns became more and more popular as a weapon of choice, guns began to rapidly develop in the 16th century into the guns we see and use today. In modern day America there is about 89 guns for every 100 people in the U.S. (â€Å"Gun Control†). The U.S . population is approximately 321,418,820 that means that there are approximately 286,062,750 firearms in the hands of the people (â€Å"U.S. Census†). In this controversy the second amendment is constantly brought up but what is the second amendment? The second amendment is in the Bill of Rights and it gives the people the right to bear arms (â€Å"The Constitution†). The Bill of Rights were a part of the Constitution which was ratified and in effect on June 28, 1788. The 2nd Amendment states â€Å"A well regulated militia, being necessary to the securityShow MoreRelatedThe World War I Ended1256 Words   |  6 Pagessome ways. Flintlock rifles were the weapon of choice during the revolutionary war. They weren’t very accurate but if you were hit by the solid lead ball that was projected at you, it would cause serious damage. They also used sabers or swords, flint lock pistols, and cannons. During these wars, they used very different strategies than those used in World War 1 to present day wars. The tactics used in the revolutionary war were kind crazy. Most battles were fought in open fields with very minimalRead MoreThe Evolution of Gunsmithing Firearms have been used for centuries to alter history. Without the2100 Words   |  9 Pagesrecorded use of this kind of firearm was in 1364 according to the timeline from PBS history deceives website. A century after the matchlock was first recorded there was another incredible breakthrough in the field of Gunsmithing it was the wheel lock. This was a true innovation in firearm history this is the first firearm with rifling to increase accuracy. How this gun worked is when the trigger is pulled it spins a wheel that has rough steel and at the same time a hammer is lowered on to the spinningRead MoreThe Physics of Firearms1626 Words   |  7 PagesThe gun is based on one simple concept: You apply explosive pressure behind a projectile to launch it down a barrel. The earliest, and simplest, applications of this idea were cannons. It wasn’t until the turn of the fourteenth century when the invention of the firing pin on a gun called a matchlock was made for the creation of the first functioning hand gun. The first functioning hand gun developed by the French was called an Arquebus, a short-barrelled firearm held at the shoulder and small enoughRead MoreThe Rebellion Of The Un ited States1763 Words   |  8 Pagestheir advanced and expert training. Compared to the Americans’ lack of skill with a weapon, this simple fact alone should have been enough for Great Britain to crush this revolution with ease. With the invention of the flintlock musket, all battlefield tactics changed drastically. Since the invention of the smokeless weapon was a century away, American soldiers were trained to fire at an area not a target. With this training, soldiers were put into linear formations instead of the larger blockedRead MoreOffice Computerized Equipment Borrowing System6949 Words   |  28 Pagestechnological object (such as a device or an appliance) that has a particular function, but is often thought of as a novelty. Gadgets are invariably considered to be more unusually or cleverly designed than normal technological objects at the time of their invention. Gadgets are sometimes also referred to as gizmos. †¢ Reservation – a term used for future acquiring of an item or equipment to be used. †¢ Borrowing – a method of acquiring the usage of an item yet to be returned after use. 1.6.2 TechnicalRead MoreArgumentative Essay on Telivision Is the Leading Cause of Violence in Todays Society9353 Words   |  38 Pagescultures, actual weights were not uniform throughout the area. The weights and measures later used in Kautilyas Arthashastra (4th century BCE) are the same as those used in Lothal.[36] Unique Harappan inventions include an instrument which was used to measure whole sections of the horizon and the tidal lock. In addition, Harappans evolved some new techniques in metallurgy and produced copper, bronze, lead, and tin. The engineering skill of the Harappans was remarkable, especially in building docks afterRead MoreThe Incredible And Sad Tale Of Innocent Erendira And Her Heartless Grandmother16345 Words   |  40 Pagesorgandy bow that looked like a butterfly on her head. You look awful, she admitted, but it s better that way: men are quite stupid when it comes to female matters. Long before they saw them they both recognized the sound of two mules walking on the flint of the desert. At a command from her grandmother, Erendira lay down on the mat the way an amateur actress might have done at the moment when the curtain was about to go up. Leaning on her bishop s crosier, the grandmother went out of the shelter andRead MoreCrossing the Chasm76808 Words   |  308 PagesLotus, or Excel, that is the adoption category, just as it is browsers, not Navigator or Explorer. In the early days products and categories were synonymous because technologies were on their first cycles. But today we have multiple decades of invention to build on, and a new offer is no longer quite as new or unprecedented as it used to be. The marketplace is therefore able to absorb this notquite-so-new technology in gulps, for a while letting one company come to the fore, but substituting anotherRead MoreMonsanto: Better Living Through Genetic Engineering96204 Words   |  385 PagesSteger, ‘The DaimlerChrysler Merger: The Involvement of the Boards’, Case no. IMD3-0771, for detailed corporate governance issues during the merger negotiations in 1998. The present case only covers the developments after the deal had taken place. J. Flint, 1997, ‘Company of the Year: Chrysler’, Forbes, 13 January: 82 ff. 1998, ‘Merger Details, from â€Å"Autonomy† to â€Å"Zetsche†Ã¢â‚¬â„¢, Automotive News, 5 October, 73(5787): 41 ff. R. Kisiel, 1999, ‘Gale: D/C won’t share platforms’, Automotive News, 4 October, 74(5841):Read MoreStephen P. Robbins Timothy A. Judge (2011) Organizational Behaviour 15th Edition New Jersey: Prentice Hall393164 Words   |  1573 Pagesexperiencing fear or extreme stress is forced to choose one of these behaviors. Any sane manager wants none of them. Imagine supervi sing Chris, who flees work when fearful or stressed, Sanjay, who fights with others when he feels cornered, and Mercedes, who locks up whenever she is chastised. Does effective management mean eliciting these behaviors? One workplace expert noted, â€Å"Fear motivation always results in inner anger and resentment against the person using the fear tactics . . . Fear motivation is the

Paradise Lost and The Blazing World Knowledge of...

Paradise Lost and The Blazing World: Knowledge of Knowledge that is Best Left Unknown John Milton set out to write Paradise Lost in order to â€Å"justify the ways of God to men† (1.26). To achieve this grand goal, Milton relies on his reader’s capability to discover a degree of personal revelation within the text. Many scholars have noted Milton’s reliance on personal discovery throughout Paradise Lost; Stanley Eugene Fish points out that discovery operates in Paradise Lost in a way that â€Å"is analogous to that of the Mosaic Law† because it invokes a level of interaction with the reader that is able to â€Å"bring us to the righteousness of Christ† (526-7). This idea of discovery differs from genre because the reader’s personal experiences†¦show more content†¦We see this notion of personal discovery on the part of the reader at work in Margaret Cavendish’s The Blazing World as well as John Milton’s Paradise Lost. In â€Å"Paradise Lost,† Milton shows his reader their shortcomings, but the n demonstrates for them the proper way to contend with these shortcomings through the poem’s dialogue and action, and ultimately, it is up to the reader to learn from what he or she has experienced. The meaning of the poem, according to Stanley Eugene Fish, is â€Å"located in the reader’s experience of it,† and the form of the poem, â€Å"is the form of that experience† (527). This grandiose scheme behind the personal discovery in Paradise Lost is for no other reason than to serve as a means for John Milton to justify the ways of God to mankind (Milton 1.26). All who read Paradise Lost undoubtedly encounter these experiences; however, the degree to which each reader progresses towards a greater understanding of God’s ways is based on the degree of personal relevance that each individual reader finds with the text. In this way, the reader’s progress in not a linear progression, but rather a cyclic and continuous rediscovery through inter action with the text (Fish 526-36). Stanley Eugene FishShow MoreRelatedA Picatrix Miscellany52019 Words   |  209 Pagesaccording to the Ihwà ¢n al-Safà ¢Ã¢â‚¬â„¢, and of talismans according to Jabir ibn Hajjà ¢n. The talisman is compared to the elixir of the alchemists (pp.7-9). Magic is to be divided into two parts, theoretical and practical, the first being confined to the knowledge of the heavens (with the parenthesis that speech is a kind of magic) and the second consisting in making use of the natural kingdoms, animal, vegetable and mineral (pp.9-10). This principle of discrimination holds good, by and large, for the arrangementRead MoreMario and the Magician18314 Words   |  74 Pageshad been preordained and lay in the nature of things; that the children had to be present at it was an added impropriety, due to the false colours in which the weird creature presented himself. Luckily for them, they did not know where the comedy left off and the tragedy began; and we let them remain in their happy belief that the whole thing had been a play up till the end. Torre di Venere lies some fifteen kilometres from Portoclemente, one of the most popular summer resorts on the TyrrhenianRead MoreMonsanto: Better Living Through Genetic Engineering96204 Words   |  385 Pagesrigorous system to work out what strategies should be followed. All the cases are about real companies, and one of the entertaining bits of the analysis process is to compare what you have said they should do with what they really have done. So, it is best not to check the Internet to see current strategies until you have completed your analysis. What follows is one analytical system, a fairly tight one that you may want to adapt according to how much time you have and the style of the case. in the