Risk and time preferences of entrepreneurs: evidence from a Danish field experiment

To understand how small business entrepreneurs respond to government policy one has to know their risk and time preferences. Are they risk averse, or have high discount rates, such that they are hard to motivate? We have conducted a set of field experiments in Denmark that will allow a direct characterization of small business entrepreneurs in terms of these traits. We build on experimental tasks that are well established in the literature. The results do not suggest that small business entrepreneurs are more or less risk averse than the general population under the assumption of Expected Utility Theory. However, we generally find an S-shaped probability weighting function for both small business entrepreneurs and non-entrepreneurs, with entrepreneurs being more optimistic about the chance of occurrence for the best outcome in lotteries with real monetary outcomes. The results also point to a significant difference in individual discount rates between entrepreneurs and non-entrepreneurs: entrepreneurs are willing to wait longer for certain rewards than the general population.     

Estimating subjective probabilities

Subjective probabilities play a central role in many economic decisions and act as an immediate confound of inferences about behavior, unless controlled for. Several procedures to recover subjective probabilities have been proposed, but in order to recover the correct latent probability one must either construct elicitation mechanisms that control for risk aversion, or construct elicitation mechanisms which undertake “calibrating adjustments” to elicited reports. We illustrate how the joint estimation of risk attitudes and subjective probabilities can provide the calibration adjustments that theory calls for. We illustrate this approach using data from a controlled experiment with real monetary consequences to the subjects. This allows the observer to make inferences about the latent subjective probability, under virtually any well-specified model of choice under subjective risk, while still employing relatively simple elicitation mechanisms.     

Vanishing senses—restoration of sensory functions by electronic implants

Is the endeavour to restore perceptive brain functions by electronic implants the first step on the way to create bionic cyborgs? Can we augment or multiply our senses by directly contacting computer chips to the brain? Will bio-implants influence and permanently change human psyche?Almost 50 years ago, the foundation of the new field of neuroprosthetics propelled research aimed at devising a seamless connection between the human nervous system and microelectronic implants.The complexity of sensory perception often renders the task of assessing efficacy and side effects of a sensory implant impossible when computer simulation and animal experimentation alone are employed. Historical development in this field has shown that some of the evaluation has to be done in investigations performed directly in the human.The consequences of such a technology will not be confined to medicine alone. This paper describes its development, state of the art, limiting factors, and future possibilities. It offers an introduction into the elementary prerequisites of neural interfacing as a basis for argumentation in the upcoming public debate.The advancement of sensory implants for the restitution or augmentation of impaired brain function requires a moral and ethical position not only of the scientist involved, but of all the society, similar to the fields of psychopharmacology and stem cell research.     

Hedonic price indices for the Paris housing market

Summary: In this paper, we calculate a transaction–based price index for apartments in Paris (France). The heterogeneous character of real estate is taken into account using an hedonic model. The functional form is specified using a general Box–Cox function. The data basis covers 84 686 transactions of the housing market in 1990:01–1999:12, which is one of the largest samples ever used in comparable studies. Low correlations of the price index with stock and bond indices (first differences) indicate diversification benefits from the inclusion of real estate in a mixed asset portfolio.*This paper has been developed at the Research Program Real Estate Finance at Goethe-University of Frankfurt/Main (Germany). We gratefully acknowledge iii Internationales Immobilien Institut, IVG Holding AG and Stiftung Rheinische Hypothekenbank for their financial support. For further information, see www.real-estate-finance.de. We thank the participants of the 8th Conference of the European Real Estate Society (ERES), the International Conference of the American Real Estate and Urban Economics Association (AREUEA), the 10th Global Finance Conference 2003 and the anonymous referees for helpful comments, which improved the paper substantially.     

Horizontal and vertical island biogeography of arthropods on green roofs: a review

From an ecological perspective, urban green roofs can be viewed as green islands embedded in an urban matrix. Island biogeography theory suggests that species richness on an island is the outcome of dynamic equilibrium between immigration and extinction. Immigration is affected by the size of an island and distance of an island from a colonizing source. In the context of green roofs, building height and horizontal distance from green areas can potentially be a limiting factor for many species. Here, we considered two distance components of green roofs - vertical (building height) and horizontal (distance of building from open green areas). Based on island biogeography theory, we would expect species richness or community similarity to be negatively related to horizontal or vertical distances from colonizing sources. The green roof literature addressing such questions is currently sparse. In our review comprised of 10 studies, we were unable to identify consistent statistically significant richness-distance or community similarity-distance (vertical or horizontal) relationships. The absence of statistically significant relationships could be due in large part to low statistical power as a consequence of both the paucity of roofs and limited range of vertical distances in many of the existing studies. In addition, these roofs differ in numerous aspects (e.g. roof size, age, substrate type, plant composition and building height). The low number of replicates, combined with the lack of homogeneity among replicates combines to reduce statistical power and our ability to detect differences.     

Zwischen Staatsbedürftigkeit und Marktaffinität. Beeinflussen Wohneigentum und Erbschaften sozialpolitische Präferenzen?

Despite considerable inequalities, the long period of prosperity has led to an increase of wealth and assets in broad parts of the population. The article builds on the thesis that this “collective upgrading” is accompanied by a change of preferences concerning the role of the state and the market in matters of social security. On the basis of this assumption, we ask whether there is a relationship between home ownership and the receipt of a larger inheritance/gift on the one hand, and social policy preferences on the other hand. In order to answer this question, we analyze—based on the German Socio-Economic Panel—group-specific preferences of taking responsibility for financial security in old age in Germany in 2002 as well as their change between 1997 and 2002. Our results not only show that homeowners and homebuyers are more sceptical towards state solutions and more affine towards market solutions in 2002 than tenants, but also that in the course of time the former more strongly tend towards market solutions than the latter. The same is valid for the difference between heirs/donees and non-heirs/non-donees. Therefore, it can be concluded that the increase of wealth and the privatisation of retirement provision were an essential precondition for an increasing scepticism towards governmental redistribution ambitions.     

The net asset value and stock prices of European real estate companies

The frequently large divergences between share price and net asset value (NAV) of listed real estate companies have been a key topic in real estate research for many years. However, previous research has mainly focused on the U.S. market, concentrating on companies’ performance ratios related to information from balance sheet statements and/or income statements as well as information from the stock market, and its results are not satisfying. This study, on the other hand, focuses on the European real estate market and presents a semi-rational model for explaining NAV spreads, taking into account performance ratios and market sentiment simultaneously. It appears that market sentiment in particular substantially improves the model, which explains more than 76% of the NAV spread. Thus, the developed model constitutes a significant improvement over previous studies on the explanation of NAV spreads.     

Leader evaluations after performance feedback: The role of follower mood

Team and organizational failures can negatively impact leadership perceptions, as followers tend to attribute performance outcomes to leadership. The current study explores how follower mood moderates this effect. In two experiments, the first with students (N = 132) and the second with a sample of the working population (N = 229), we show that performance information has a weaker effect on leadership evaluations when the follower is in a positive mood as compared with a negative mood. In addition, we show that this moderation effect holds for performance information about the team as well as the leader. We discuss how these findings extend the cognitive follower-centric perspective on leadership by acknowledging affective influences and explore several counter-intuitive implications of these findings.