Considerations for the Costa Rican Fiscal Plan

Over the last few weeks, the Fiscal Plan discussions have heated up, but mainly regarding an isolated view of the tax application and how this is expected to heal the government’s deficit. Though what else could be expected if the country is facing one financial problem that, in theory, is simple: Costa Rica spends more than what it earns. Without a doubt, public finances would find temporary relief in augmenting the tax load as this package intends. However, the current goal to get more money to cover the expenses does not address the structural problems of public finances.
What is the actual deep-rooted problem that the fiscal plan should try to solve? The national finances will find peace once three aspects are addressed: the efficiency of public spending, fiscal evasion, and the notion of State as a provider for the private sector rather than others providing for it.
The government has to increase control of its expenses. Bureaucracy expenses rose 20% during the previous administration. We have the highest deficit level in Latin America (5.2% of GDP). The Economic Commission for Latin America and the United Nations (CEPAL for its acronym in Spanish) expects a 5.5% deficit of GDP in 2012. Last October, based on the discussion of the Legislative Assembly regarding the approval of the 2012 budget, they found cases of superfluous spending, such as the extra 100 million colones budgeted in Police horse feed without proportionally adjusting the amount to the number of animals, or the 29,000 million colones destined for consulting.
In November, the National Comptroller's Office (Contraloría General de la República) published a press release reflecting tax evasion (No. DFOE-SAF-IF-06-2011). This document emphasizes that rent tax evasion reached 19% of collections out of the potential 78,000 million colones that should come in. Moreover, a 63% of taxpayers declared zero colones for the 2010 period. Other studies that the Comptroller’s office has performed indicate an evasion of 30% in sales tax. It is not surprising that this organization pleaded to the General Tax Office (Dirección General de Tributación) to improve its collection practices and its tax sanctions. Additionally, the government must understand its mission as facilitator of its population’s development and not expect its people to provide for it. However, the national practice works opposite to this. Symptoms of this include the cases of extensive procedures to set up a business, the deficiencies of clear policies for national development that accompany private businesses, and now, asking more money of Costa Ricans to finance excessive spending. The World Economic Forum confirms the government’s mediocre performance to facilitate private development in its competitiveness report for 2011-2012; in this report, it highlights our country is in the 83 position in infrastructure and the 109 in macroeconomic environment out of a 140-country list. Hindering private development is stopping the population from generating wealth and, therefore, preventing the economy from becoming stronger. In addition, it is compromising the source that generates tax money.
On the other hand, the tax burden of Costa Rica, according to Juan Carlos Hidalgo of the Cato Institute, reached 23.1% of GDP in 2008 and 21.7% in 2009. During these same years of recession, the U.S. registered a 26.1% and a 24%, respectively. The proportions are similar and demonstrate that Costa Ricans do not have low levels of taxes.
This should lead us to conclude that the government of Costa Rica does not have the moral authority to ask Costa Ricans to pay more taxes before it starts showing an attitude change in rational money management. Otherwise, it feeds an unsustainable system and obstructs the development of the private sector.

Is the US economic recovery sustainable?

The financial world is full of expectations or uncertainties as you may want to define it. We are currently facing a new expectation (or uncertainty?) around the US economic recovery prospects. How reliable is the fact that the US will make its way back? We will state some points which presume that US economic recovery will be sustainable.
First off, we should consider the current state: we are technically out of the recession. The National Bureau of Economic Research has officially stated the end of the recession dating June 2009. In addition to that, the US GDP has shown during 5 consecutive quarters a positive growth. This shows that US seems to be back on the track.
Furthermore, the US must be seen in a worldwide perspective. This means to take a look about the trade volume the US holds with its major commercial partners. Evaluating from October 2009 to October 2010 and according to the US Trade Commission, the US shows an increase of 25.4% in imports and 22.5% for exports. This rate of increase in trade evidences that the US is experiencing an active and growing economic dynamism at the same time that they find the appropriate parties to trade with in order to support their economic reactivation.
Moreover, the US government and the FED do not have any plans to withdraw the stimulus packages. They will actually reinforce them. At www.recovery.gov , you may find how as of September 2010 the US government has injected into its economy around USD 251.5 billion generating around of 670 000 new job positions. They have focused in education, health, transport and energy: all of them are strategic sectors for any economy. In addition, the FED keeps in mind to hold the interest rate between 0% and 0.25%, and they have repurchased its securities for USD 1.7 trillion. They still have plans to continue with the quantitative easing programme up to June 2011 by acquiring additional securities up to a lump sum of USD 600 billion. In this way, the FED provides enough liquidity in order to reactivate employment, consumption and investments. FED measures made possible a total of 151 000 new job positions during last October in the private sector. The US government and the FED are paying close attention to the economic recovery indeed.
It is important to point out that in addition to all of these economic efforts, new regulations come again into the game in order to avoid a similar collapse as the one recently suffered. The recent approval of the Dodd-Frank bill sets the new restrictions about leverage and excessive risk taking from financial institutions. These new regulations basically set new mechanisms to monitor the economic activity of the financial institutions under a principle which sets something like “the riskier you get…the more regulated you will be”.
The economic recovery can be understood as a vector. We already have the magnitude given by the actual experience of the economic recuperation and the supporting role of the US government and the FED. This process has taken investors to take a look again to riskier assets such as shares especially. The appropriate direction is set by the new regulations which will diminish the chances to suffer from a similar collapse as we experienced during 2008 and 2009. The vector is properly composed. Uncle Sam will be able to walk again.

Special thanks to Pablo Campos, Mario Torres, Carolina Fernandez and Carolina Martinez because their support to this article

Is China Sustainable?

China has experimented an annual economic growth of around 10%. They have over 1.3 billion of people. It has become the production plant of the world, from trinkets to High-Tec products. The Deutsche Bank recently pointed out that China may overcome the US as the first world economy during 2020’s decade.
China recently surpassed Japan as the second world’s largest economy. China, being the biggest buyer of American debt, is quite serious about strength its economic structure.

Thus, considering these curious prospects of this extreme growth, we must wonder ourselves: is it possible to consolidate the economic power of China?

On first instance, China faces the challenge of wealth distribution. According to the International Monetary Fund, China has a GDP per capita of just US$4000, having the 97th position in the world; and considerably far away from the US status having US$48000. A country full of contrasts, whist you have opulence in the coast side of China, selling Ferraris and opening Cartier store; in the countryside people are starving. China is having an unbalanced growth. This is a critical point to generate riots.

On the other hand, Chinese labour cost is rising according to Reuters. People’s Bank of China recently stated that Chinese government must act upon strengthen the internal market to extend their intentions to continue growing. Increasing consumption power is critical to achieve that. Cheap labour, one of the main drivers of the Chinese economic boom, could be compromised in order to attract future foreign investment.

In addition to this more expensive labour cost prospect, Fan Gang, a respected Chinese economist stated that China needs 150 million new job positions annually to guarantee the outstanding 8% annual growth rate. This is equivalent to generate 375 companies of the size of IBM, employment wise. Cost and volume of the labour force seem to be conspiring against China.

Exports, another of the Chinese economic growth pillars, could lose attractiveness because Yuan revaluation. International pressures may cause some negative effect to this strategic factor of the Chinese economy.

It is a paradox, that this time a communist regime is not obstructing the dynamics of an economy. Since this communist political power acts as a power to only control people, we should not blame this time communism as a source of obstruction for the Chinese economic development. At the end, it has been under a communist government that China applied western economic measures to facilitate this boom.

China is looking forward to continuing under this pace. Indeed, an unbalanced growth. This is a development approach that sooner or later, will rise questions about human rights and labour laws. The Chinese phenomenon could end as massive building with an unsound base.

Having access to the markets

A point of view from a developing country

During November 2001, the International Monetary Fund stated that the basis to achieve economic growth and poverty reduction is having free access to international markets. The strong emphasis goes to the extreme in which they establish that no country would be able to reach economic growth being immerse in a protectionist and isolated economic scheme.
Nevertheless, would having free access to international markets guarantee economic growth by itself? In order to answer this, we shall understand first who have been applying this approach, how they did and the most important above all: achieved results.
Inward Foreign Direct Investment flows (IFDI), among other variables, may evidence the openness level of an economy. From 1980 to 2008, the statistics from IMF reveals an average annual flow of US$393 billion of IFDI for developed economies. Whereas developing economies reach less than the half of this amount in the same period (43%).
Developed countries have a clear emphasis to keep their inflation under control, and also high standards in health, education and security. In addition they potentiate their local companies. This combination enables the country to compete among others enhancing a more likely panorama to succeed in local and foreign markets.
Applying a free access to foreign markets, from a developing country standing point of view, without having a complementary local development policy could be prejudicial. Taking an inward perspective, and under an scenario in which we have a negative commercial balance and some foreign direct investment challenging local companies could displace the national productive structure by bigger foreign companies. And from an outwards perspective, a nation with a poor productive system would not be able to take advantage of the opportunities of having free access to international markets to increase their revenue.
In addition, having inflows of foreign investment without a joint development policy, could lead to a lost opportunity to concatenate the national productive system and facilitate knowledge transference. For instance, Korea was successful doing this by applying their approach known as Knowledge Based Economy since the 60’s (and we already know the clear results they got as country).
In this sense, some specialists from Georgia State University and the Central University of Finance and Economics of China, were able to point out that foreign investment (FI) in developed economies was sensitive to taxation policy, whereas developing countries FI were sensitive to governance measures and corruption. For both cases, FI showed to be sensitive to the infrastructure level as well.
Therefore, a developing economy must give the same priority to their development policy and access to foreign markets policy at the same time. They must be seen as complements. Anyway, struggling to succeed in free markets without any strategy that potentiate local advantages is inconvenient.

Flying high?

The role of air transport has been so relevant that it changed our way to consider long distances in terms of time instead of length. It is quite obvious the importance to guarantee an efficient flow of cargo and passengers as well. The real issue related to air transport, and particularly about airlines is profitability.

According to the Daily Financial, airlines industry reported losses for USD 9.4 billion during 2009 and during 2010 it may reach loses fro USD 2.8 billion.

Airlines business has a massive issue related to economic cycles. When the sun shines for the financial markets and everything is bullish, we find high oil prices that boost operational costs. On the other hand, when economy is depressed people do not have money to travel. In both cases affect profits.

Therefore, it seems natural in this industry an increasing level of mergers and acquisitions (M&A) to keep businesses running. This has become a preferred strategy that ensures some economies of scale and contributes to the consolidation of some companies in the market. For instance we can name the recent cases of the merger between Iberia and British Airways, and between United Airlines and Continental (this one would create the biggest airline in the world).

Nevertheless, some specialists point out that M&A in the long term will enable monopolies because this exaggerated consolidation of the biggest companies that will expel the smaller competitors. As some recent evidence, the Air Transportation Association reported that 37 airlines have gone to bankrupt and 9 were liquidated since 2000. Also, a lack of competitors would increase fares and bad quality service if no regulation is dictated.

In spite of these dark prospects, the compulsory need for air travel seems to be the real fuel for this business considering the absence of other alternatives to transport in big scale. Technology might have the last word in this matter if by any chance we can get super trains or another creative way to travel that will replace most of air travels for instance.

It might arrive another opportunity to the industry if technology delivers successfully fuel-efficient aircraft such as the brand-new Boeing 787. Nevertheless, this does not mean emancipation from oil dependency. In addition, an upper-hand from the government having a regulating role could be helpful as well to keep small business running. Thus, what would be the next step for a business that started with our fascination to imitate the flight of the birds? It seems is not compromised so far, but indeed full of issues and scarce of good profits.

The Aftermath of the Credit Crunch

Nowadays that we see the financial markets are going up again, many people started to analyze: what’s next to prevent another crisis of this magnitude? Some months ago, companies such as RBS or AIG were about to be declare in bankrupt but the bail out from the governments prevented a major catastrophe. At the end, it was a an action to prevent the consequences of excessive risk taking from first-class banks (a very posh way to disguise the terrible effect of greediness).

How can we sort out the dichotomy of the operations of the financial markets and to establish proper rules of the game to prevent another disaster? During last January, the president of the US, Barack Obama, publicly announced his intentions to approve a new regulation for the financial markets known as the Volcker Rule. This rule obtains its name after former chairman of the FED inspired the reform. Basically, this new regulation establishes a limitation to banks to simultaneously assume proprietary trading and retail banking operations under the same umbrella. Why is that? Banks found really convenient to assume extremely risky position by leveraging on the deposits of their clients.

The announcement of this new regulation brought as consequence that the share value of many banks dropped because liquidity would be affected under these new frame. Besides, information given was too broad which generated uncertainty in the market.

I think there is a consensus among the different actors: no one wants another financial crisis of the same dimension again. In order to approve a regulation that addresses the concerns from the taxpayers, guarantees a healthy business atmosphere and keeps enough liquidity in the market, it is a must to understand the causes behind the credit crunch.

Some specialists, including Volcker, have pointed out that after the abolishment of the Glas-Steagal law in 1999, which precisely divided commercial from investment banking, was the turning point to facilitate the crisis. Therefore, the new efforts to regulate the financial markets are meant to be inspired in this former law.

It is important to recall that Adam Smith’s invisible hand and Friedman’s principles seem to have not more room in the economic models because they proved to fail due to the fact that it is evident that market cannot auto-regulate themselves. On the other hand, it seems that regulation was the key to keep the financial markets relatively healthy before and it was government intervention which saved the economy. George Soros, a well-known financial guru, pointed out that the academia duty now is to rethink the economic theory due to the conventional theory failed.

We cannot be naïve thinking again that the same conventional banking practices will reconsider their actions, knowing the fact that their aim is just utility maximization. On my belief, regulation must exist but should be oriented to the limit excessive risk taking and the creation of toxic financial products such as the Credit Default Swaps of subprime mortgages. To separate investment from commercial banking nowadays could bring leveraging problems because the investment banks would not have enough funds to provide liquidity to the market and enhance the economy through private equity and hedge funds. In addition, I am from the side to limit bonus paid to the bankers. In this fashion, it is less likely that greed will step on the cleverness of the bank leaders again.

There is another point to consider as well. After this nasty experience, it is evident that financial markets are interdependent and easily affected among each other. This, because we have a globalised connotation, actions taken must be global as well. Whatever may be the final result of these new regulations, these should be calibrated among at least by the major financial actors. I precisely point out the case of the US, the UK, Europe and Japan. Otherwise, the possible restrictions to a specific market and keep business-as-usual in others may lead to speculative flows of capital that could damage in first instance those who approved the regulations first.

Who is not able to recall his past is condemned to live it again. It is clear that regulation and government intervention play a major role than we used to think. History seems to be on Keyne’s side. Therefore, it is necessary that world takes into account that is a more integrated and fragile place which needs new measures in order to guarantee a sustainable economic growth.

Do investors diversify enough? Psychological biases and portfolio investment

I. Introduction

According to Baker and Nofsinger (2002), the conventional financial theory is based on the presumption that markets are efficient and investors tend to behave in a rational way. They extend the discussion arguing that every model ignores the fact of the human behaviour involved in the decision taking and investment approach people go through. They argued that individual and social psychological biases make a difference in investors’ returns since they do not tend to behave rationally. In fact, Shefrin (2000) stated that these biases may expose investors’ wealth to a serious risk and possible unexpected losses given by lack of diversification. This situation has brought economic research attention in order to understand the market behaviour and define better realistic model.

As result of this the following question arises: Are investors’ lack of diversification due to psychological biases? In this essay we will expose some ideas behind the topic. In our endeavour we will give special attention to the phenomenon of Home Bias puzzle as a way to answer our question. Home Bias is known as investors’ preference to overweight domestic securities in their portfolios (Grinblatt and Keloharju, 2001). To devise what causes the phenomenon may lead to a conclusion about the relevance of psychological biases to affect lack of diversification.

In this essay we will first expose the common approaches given to explain how Home Bias is given and how it relates to a lack of diversification. Next, we will extend the topic bringing some related empirical evidence. Later, we state possible future research and finally we present some conclusions.


II. Home Bias as an Explanation for Lack of Diversification

On the grounds of rational investment, diversification is a proven way to avoid risk and lock a bigger probability of success. Spreading the risk among several securities brings the chance to achieve a combination of higher return with low risk. Diversification strategy is so important, that many financial literatures have taken the aim to analyze why investors do not follow this rational behaviour in order to secure the best possible results.

Home Bias is the preference of the investor to acquire domestic securities with some sense of familiarity. The phenomenon is present when investors overweight with local securities their portfolio. This overweight brings within a lack of diversification. For this essay purpose, we will understand lack of diversification as the deficiency of investors to allocate foreign securities and the excessive weight they give to domestic securities in their investment portfolios. There is an avid debate to understand how the Home Bias puzzle is given. There are two current attempts of explanation: the objective perspective and the subjective perspective. Objective perspective stands for all those factors related to market framework such as regulation and facilities. Subjective perspective pursues a psychological approach to the topic. Each of them makes an effort to find an answer to Home Bias essence as the source of the lack of diversification in investment portfolios from opposite standing points. (French and Poterba 1991)

A. Objective Perspective
This explanation advocates to those actions based on rational facts that may limit diversification. We will mainly focus on Coval and Moskowitz (1999) studies in Institutional Constraints. Institutional Constraints point out all the regulations boundaries such as government restrictions, foreign taxes and transactions costs which may lead to concentration of domestic securities in investments portfolios. This argument mainly states that investor diversifying capacity is constrained by the obstacles found to acquire stocks abroad of their domestic market, pushing him to rely on domestic securities.

French and Poterba (1991) shed some light about the real impact of these constraints to explain the lack of international diversification. Institutional Constraints are supposed to limit foreign stocks holding. Nevertheless, they argued that these constraints are not the best approach to explain the low level of international allocation equity because they just define the frame in which investors interact. The result of their findings showed that Institutional Constraints are not so different among them. To address this state, we will mention Tax Burden and Transaction Costs.

They found that the actual Tax Burden among countries with big stock markets are very similar (such as: United Kingdom, United States and Japan). Even though, they added that investors’ home country may accredit the foreign withholding taxes as part of the domestic taxes. So, there is no actual difference to push investors to select domestic securities. (French and Poterba, 1991)

Transaction Costs are proven to be linked to the liquidity of the market. This means that for cases of markets with great liquidity (i.e. New York Stock Exchange) the transaction costs are proven to be lower. In theory, a rational investor may choose the market with lower costs as one of the top criteria. Thus, Transaction Costs are not an issue to diversify portfolios. (French and Poterba, 1991)

Furthermore French and Poterba (1991) questioned if explicit limits on cross-border investment may affect the weight of a portfolio. In practice this does not seem to be the case. For example, they explained the French case in which a foreign investor may be able to hold up to 20% of any firm without any authorization of the Ministry of Economy and Finance.
Therefore, given the past considerations we cannot suggest the objective approach in its Institutional Constraints form to explain the lack of diversification in investment portfolios under the Home Bias scope.

B. Subjective Perspective
We will now focus on the subjective approach describing the main psychological biases that investors experiment. Baker and Nofsinger (2002) argue that investors put together their ideas and feelings to decide what and how to invest. They establish two big categories to classify these psychological biases: how investors think and how investors feel. We will explain more relevant aspects of both areas to show how they demonstrate with a lack of diversification under Home Bias point of view.

B.1 How Investors' think
Regarding investor’s thinking, Baker and Nofsinger (2002) stated two main reasons for no-diversification related to Home Bias: Familiarity Bias and Mental Accounting.
Familiarity Bias explains that people are more likely to deal with known facts rather than to discover new elements. They rely more on familiar facts because they tend to believe this will avoid undesired surprises and bigger risk. Therefore, they may lead investors to give excessive weight to domestic securities because they generate some sympathy with those companies who have some affinity with their core business. This can explain why household investors tend to invest in those companies they are working for as Grinblatt and Keloharju (2001) suggested.

Furthermore they explain the Mental Accounting is the propensity to overlook interaction between several assets. Shefrin and Statman (2000) found that Mental Accounting distorts the perception of risk because investors are not able to correlate several investments at the same time. Thus, Baker and Nofsinger (2002) pointed out that this wrong perception may lead the investor to choose a wrong or poor diversification. It seems easier for investors to access local news rather than monitor several foreign markets particularities.

B.2 How Investors' feel
Moving now to the fact of investor feelings, Baker and Nofsinger (2002) established just the Attachment Bias as the feeling that may affect investment diversification. The Attachment Bias is an emotional linkage of the investor to a security. This leads the investor to concentrate their investment in those securities with some affinity related to his idiosyncrasy such as language or cultural background (Grinblatt and Keloharju, 2001).

Therefore, the psychological approach presents itself as a good option to explain Home Bias as a cause of lack of diversification. To complement this theoretical explanation, we will discuss in the following section some related empirical papers.


III. Empirical Evidence

Among the latest empirical evidence to support the Home Bias as one of the Psychological Bias expresions of non-diversification in investment portfolios we found the work of Grinblatt and Keloharju (2001). They followed a study in Finland in order to find the presence of Home Bias puzzle in the equity market. They ran an analysis based on the evaluation of three psychological aspects: perception of distance from investor to the company, cultural empathy and language affinity. After, applying some ratios and regression analysis separately for each area they found that these three factors affected investments relation in proportion with the investors’ sophistication. Thus, household investors and less savvy institutions were more affected by these criteria than sophisticated investors. These results are good empirical evidence of Mental Accounting bias. The preference of an investor for companies with the same cultural background and the same language is a good example of Familiarity Bias and Representation Bias. Investors’ sophistication findings are a reflection of the statement given by French and Poterba (1991) which talks about the difficulty of the investor to understand risk exposure and expected returns due to a lack of knowledge.

In addition to these findings, Coval and Moskowitz (1999) found that the United States investors showed a bias to invest in firms geographically closer. Moreover, United States investors held more than 90% of local securities in their portfolios giving few chances to foreign securities. The same phenomenon is shown by French and Poterba (1991) who demonstrate that in other countries the proportion of domestic securities is bigger. This is the case of United Kingdom (92%), Germany (79%), France (89.4%) and Japan (95.7%).


IV. Further Research
Nevertheless, there are several areas available to extend the work done. To prove the actual relation of culture, language and distance effect on investments, Grinblatt and Keloharju (2001) argued that the same analysis should be done in bigger and more complex stock market (i.e. FTSE100). These markets offer the possibility to explore the relation of investors when they are exposed to a more heterogeneous and dynamic environment.

French and Poterba (1991) extend the invitation to study mutual funds as proxy of this behaviour. The domestic diversification of mutual funds has been proven but there is no evidence they tend to diversify with foreign securities.

Baker and Nosinger (2002) argued a lack of information to prove the real impact of Psychological Bias for portfolio diversification with more empirical analysis. They also extend the challenge to adapt experimental economics with psychological methods in order to find an answer for the incidence of psychology in investment decisions and the utility of surveys to measure current investors’ behaviour.


V. Conclusion
Home Bias puzzle is a phenomenon that leads investors to overweight domestic securities in their investment portfolios. It tries to explain why investors do not diversify their portfolios due to psychological biases that lead them to higher risk exposure. The topic has brought the attention of several researches in the financial areas. (Grinblatt and Keloharju, 2001)

There is some evidence investors are not diversifying enough due to the Home Bias phenomenon. French and Poterba (1991) found that major trading countries overweight their portfolios with domestic securities. Thus, they established two explanations to the lack of diversification: Institutional Constraints and Psychological Bias. Institutional Constraints stands over an objective evaluation of trading frame, but is it proven it does not affect the lack of diversification and does not push the investor to fall in Home Bias. On the other hand, Psychological Bias suggests that investors’ behaviour is pushed by subjective criteria and produce Home Bias phenomenon. This work is extended by Baker and Nofsinger (2002) categorizing some Psychological Bias that may affect investors’ criteria.

In addition, Coval and Moskowitz (1999) followed and empirical analysis for the United States and demonstrated diversifying decisions were affected by geographic factors. Later on, Grinblatt and Keloharu(2001) showed Finnish investors were biased to choose their securities by language, culture and proximity criteria.

Therefore, there is evidence supporting that investors do not diversify enough with international securities because the effect of Home Bias as a psychological bias.
Nevertheless, researchers agree that investigation can be extended with more empirical analysis and a possible mix of psychological methods and experimental economics. (French and Poterba, 1991, Grinblatt and Keloharju, 2001and Baker and Nosinger, 2002)

References

Baker H. K. and Nofsinger J. R. (2002) “Psychological biases of investors” Financial Services Review 11: 97-116

Joshua D. Coval and Tobias J. Moskowitz, (1999) “Home Bias at Home: Local Equity Preference in Domestic Portfolios” Journal of Finance, American Finance Association, vol. 54(6), pages 2045-2073

French, Kenneth & James M. Poterba (1991) "Investor Diversification and International Equity Markets” American Economic Review 81, 222-226

Mark Grinblatt M. and Keloharju (2001) “How Distance, Language, and Culture Influence Stockholdings and Trades” Journal of Finance, American Finance Association, vol. 56(3), pages 1053-1073, 06

Shefrin, H. (2000) “Beyond greed and fear: understanding behavioural finance and the psychology of investing” Harvard Business School Press.

Shefrin, H. and Statman, M. (2000) “Behavioural portfolio theory” Journal of financial and Quantitative Analysis, 35 (2), 127-151