We investigate how tax loss offset restrictions affect an investor's evaluation of risky investments under bounded rationality. We analytically identify behavioral tax effects for different levels of loss offset restrictions, tax rate and prospect theoretical biases (loss aversion, probability weighting and reference dependence) and find tax loss offset restrictions significantly bias investor perception, even more heavily than the tax rate. If loss offset restrictions are rather generous, investors are very loss averse or assign a huge weight to loss probabilities, taxation is likely to increase the preference value of risky investments (behavioral tax paradox). Surprisingly, the identified significant perception biases of tax loss offset restrictions occur under both high and low tax rates and thus are relatively insensitive to tax rate changes. Finally, we identify huge differences in behavioral tax effects across countries indicating that tax loss offset restrictions crucially determine the perceived tax quality of a country for risky investments. Our analysis is relevant for policy makers discussing future tax reforms as well as for investors assessing risky investment opportunities. / Series: WU International Taxation Research Paper Series

Reward prediction errors are quantitative signed terms that express the difference between the value of an obtained outcome and the expected value that was placed on it prior to its receipt. Positive reward prediction errors constitute reward, negative reward prediction errors constitute punishment. Reward prediction errors have been shown to be powerful drivers of reinforcement learning in formal models and there is thus a strong reason to believe they are used in the brain. Isolating such neural signals stands to help elucidate how reinforcement learning is implemented in the brain, and may ultimately shed light on individual differences, psychopathologies of reward such as addiction and depression, and the apparently non-normative behaviour under risk described by behavioural economics. In the present thesis, I used the event related potential technique to isolate and study electrophysiological components whose behaviour resembled reward prediction errors. I demonstrated that a candidate component, “feedback related negativity”, occurring 250 to 350 ms after receipt of reward or punishment, showed such behaviour. A meta-analysis of the existing literature on this component, using a novel technique of “great grand averaging”, supported this view. The component showed marked asymmetries however, being more responsive to reward than punishment and more responsive to appetitive rather than aversive outcomes. I also used novel data-driven techniques to examine activity outside the temporal interval associated with the feedback related negativity. This revealed a later component responding solely to punishments incurred in a Pavlovian learning task. It also revealed numerous salience-encoding components which were sensitive to a prediction error’s size but not its sign.

The dissertation called Economic and Psychological Aspects of a Consumer's Behaviour and Decision-Making is dedicated to a consumer's behaviour and decision-making in economic and financial issues from the perspective of classic economy, psychology and behavioural economy. The theoretical part describes the expected utility theory and psychological findings on one hand, and presents the so called Prospect Theory and systematic biases on the other hand. The practical part comprises a research. Mission of the questionnaire survey is to find out whether behaviour and decision-making are rational and correspond with the classic economy theory or whether consumers behave irrationally and verify presumptions of behavioural economy.

The topic of work "Investor's psychology on Foreign Exchange market" is to explain basic assumption for business on the Foreign Exchange markets and also methods how to profit on them. Work focus on soft factors, which are important in investor's decisions making process. These factors are typical for human's decisions, which are not always optimal from statistical and logical side, and may cause mistakes and investor's lost. The most important economic theories of client's behavior are used for conclusions. The major part of work foces on client as individual, describes his motivation, expectation, trade joining and risk adaptation. Theoretical data are participants of the research, which is based in two decision's making games. Conclutions are created from results of games and their comparison.

Tax evasion is a serious issue that influences governmental revenues, IRS enforcement strategies, and tax policy decisions. While audits are the most effective method of enforcing compliance, they are expensive to conduct and the IRS is only able to audit a fraction of the returns filed each year. This suggests that audits alone are not sufficient to curb the billions of dollars of tax evaded by taxpayers each year and that a better understanding of factors influencing compliance decisions is needed to enable policymakers to craft tax policies that maximize voluntary compliance. Prior research tends to model compliance as economic, environmental, or personal decisions; however, this study models it as a multifaceted decision where these three perspective individually and interactively influence compliance. It is the first to decompose perceived detection risk into two dimensions (selection risk and enforcement risk) and investigates how these two dimensions of risk, decision domains (refund or tax due positions), and three personal factors (mental accounting, narcissism, and proactivity) influence taxpayers’ compliance decisions. I conducted a 2x2 fully crossed experiment involving 331 self-employed taxpayers. These taxpayers have opportunities to evade that employed taxpayers do not. For example, they can earn cash income that is not reported to the IRS by third parties. For self-employed taxpayers (especially those wanting to evade), perceived selection and enforcement risks may be distinctly different depending on a taxpayer’s situation, what they believe they can control, and what risk they are willing to accept. For example, selection risk may be perceived as the greatest risk for those with unreported items on their return, while enforcement risk may be more prominent for those perceiving certain levels of selection risk. Thus, I believe self-employed taxpayers are the most appropriate population to sample from and are likely have reasonable variation in the three personal factors of interest. I find that taxpayers do differentiate between selection and enforcement risks but the difference only manifests for taxpayers in certain decision domains. Taxpayers in a refund position (i.e. conservative mindset) had a greater sensitivity to the form of payment (cash vs. check) and appeared to use this information to make inferences about enforcement risk which was significantly different from their perceptions of selection risk. Conversely, tax due taxpayers (i.e. aggressive mindset) appeared to overlook the form of payment and did not assess these two risks as significantly different. Evaluating the full sample suggests that both selection risk and enforcement risk have a positive influence on compliance. Further, these risks interact to influence compliance. Specifically, compliance is greatest when taxpayers perceive a high likelihood of being selected for an audit and enforcement risk only matters when selection risk is low. This finding is interesting and suggests that avoiding interaction with the IRS is a primary objective of taxpayers. In line with my findings of taxpayers perceiving different risks in refund and tax due positions, the influence of risk perceptions on compliance differed for taxpayers in these positions. Refund taxpayers were influenced by both selection and enforcement risk, similar to the full model; however, tax due taxpayers were only influenced by selection risk and appeared to completely overlook enforcement risk when making their reporting decision. Lastly, the study shows that personal characteristics can also influence compliance in the presence of economic and environmental determinants, but some characteristics only manifest in specific decision domains. Of the three personal characteristics investigated, only mental accounting orientation was a significant predictor for the full sample. When the sample was split by decision domain, only proactivity was a predictor of compliance for refund taxpayers, while only mental accounting orientation was a predictor of compliance for due taxpayers. While I did not find results for narcissism and compliance, my subsequent analysis suggests that individual dimensions of narcissism may be better predictors of compliance than the full measure. Specifically, the exploitation dimension was a significant predictor of compliance for those in a tax due position. This study make several contributions to the accounting and tax literatures. First, this study provides support for a two-construct conceptualization for perceived detection risk that includes both selection and enforcement risks. Second, it answers calls to investigate more comprehensive compliance models and finds economic, environmental, and personal characteristics individually and interactively influence compliance. Third, this study investigates three personal factors that have not been investigated in the tax compliance literature. Finally, this study answers calls for research on self-employed taxpayers and suggests that the IRS will be more successful in increasing compliance by playing on taxpayers’ aversion to being selected for an examination than communicating information on the IRS’ ability to detect noncompliance during an examination.

Insurance has been considered as a useful tool for farmers to mitigate income volatility. However, there remain concerns that insurance may distort crop production decisions. Positive mathematical programming (PMP) models of farmers’ cropping decisions can be applied to study the effect of agricultural business risk management (BRM) policies on farmers’ decisions on land use and their incomes. Before being used to examine agricultural producer responses to policy changes under the expected utility framework, the models must first be calibrated to obtain the values of the risk aversion coefficient and the cost function parameters. In chapter 2, three calibration approaches are compared for disentangling the risk parameter from the parameters of the cost function. Then, in chapter 3, to investigate the impacts on production incentives of changes in Canada’s AgriStability program, farm management models are calibrated for farms with different cost structures for three different Alberta regions. Results indicate that farmers’ observed attitudes towards risk vary with cost structure. After joining the program, all farmers alter their land allocations to some extent. The introduction of a reference margin limit (RML) in the AgriStability program under Growing Forward 2 (2013-2018), which was retained in the replacement legislation until 2020, has the most negative impact on farmers with the lowest costs. The removal of RML significantly increases the benefits to low-cost farmers. Traditional insurance products provide financial support to farmers. However, for fruit farmers, the products’ quality can be greatly affected by the weather conditions during the stage of fruit development and ripening, which may lead to quality downgrade and a significant loss in revenue with little impacts on yields. Hence, chapters 4 and 5 investigate the conceptual feasibility of using weather-indexed insurance (WII) to hedge against non-catastrophic, but quality-impacting weather conditions to complement existing traditional insurance. Prospect theory is applied to analyze a farmer’s demand for WII. The theoretical model demonstrates that an increase in the volatility of total revenue and the revenue proportion from blueberries increases the possibility of farmers’ participation in WII. On the other hand, the increase in the value loss aversion coefficient and WII’s basis risk leads to less demand for WII. To design a WII product for blueberry growers to hedge against quality risk, a quality index must be constructed and the relationship between key weather conditions, such as cumulative maximum temperature and cumulative excess rainfall, and the quality index should be quantified. The results from a partial least squares structural equation modeling (PLS-SEM) show that the above goals are achievable. Further, rainfall and temperature can be modelled via a time-series model and statistical distributions, respectively, to provide reasonable estimates for calculating insurance premia. / Graduate / 2022-08-05

Cette thèse a pour objectif d’évaluer et de comparer la performance des stratégies d’assurance de portefeuille pour tenter de définir quelles stratégies doivent être privilégiées par les investisseurs. Nous comparons de nombreuses stratégies d’assurance (OBPI, CPPI, put synthétique et Stop-loss) entre elles mais également avec quelques autres stratégies de référence. Nous utilisons différents critères de comparaison qui comprennent: 1. Les distributions de pay-off, le niveau de protection, la dominance stochastique et le coût d’assurance dans différentes conditions de marché identifiées par des modèles à changements de régime markovien. 2. Les mesures de la performance ajustée au risque qui peuvent refléter les préférences des investisseurs vis-à-vis du risque et de la rentabilité. 3. Les préférences des investisseurs en intégrant la théorie cumulative des perspectives (TCP). Nos résultats semblent mettre en évidence une dominance des stratégies CPPI dans la majorité des cas et pour la majorité des critères de comparaison. / This thesis is set out with the objective of evaluating and comparing the performance of portfolio insurance strategies. We try to figure out when and why one portfolio insurance strategy should be preferred by investors in practice. To meet this objective, main portfolio insurance strategies (OBPI, CPPI, Synthetic put and Stop-loss) are compared relatively to each other and to some benchmark strategies. Portfolio insurance strategies are applied within different implementation scenarios and compared according to various criteria that include:1. The payoff functions, stochastic dominance, the level of protection and the cost of insurance under bull and bear market conditions. 2. Various risk adjusted performance measures that reflect different investors’ preferences toward risk and return. 3. The preferences of investors who act according to cumulative prospect theory (CPT). Our results reveal a dominant role of CPPI strategy at the majority of cases and according to the majority of comparison criteria.

Bakgrund: Informationssäkerhet är någonting som företag inom alla branscher bör ägna sig åt eftersom samtliga organisationer är utsatta för informationsrisker. Avsikten med informationssäkerhet är att skydda information så att den finns tillgänglig vid behov, är tillförlitlig och för att säkerställa att endast behöriga har åtkomst (Informationssäkerhet, 2015). Bristande informationshantering kan exempelvis resultera i dataförluster och läckt kunddata vilket i sin tur kan leda till försämrat kundförtroende och stora intäktsförluster. Företags utsatthet för informationsrisker påverkas både av interna och externa faktorer. Utbrottet av Covid-19 är ett exempel på en extern faktor (Humla, 2020). Enligt en rapport är svensk tillverkningsindustris hantering av informationsrisker kraftigt eftersatt i förhållande till övriga sektorers hantering av informationsrisker (Radar Ecosystems Specialists, 2017). Syfte: Denna uppsats undersöker hur ett företag inom svensk tillverkningsindustri arbetar med informationssäkerhet (eng. information security risk management, ISRM). Vidare applicerar vi en teoretisk lins i form av prospektteorin för att förklara informationssäkerhetsarbetet. Vi undersöker även om beslutfattare inom IT-säkerhet uppvisar tendens till övermod och huruvida detta kan påverka företagets arbete med informationssäkerhet. Metod: Uppsatsen är en kvalitativ fallstudie och det empiriska materialet har inhämtats genom semistrukturerade intervjuer med beslutfattare och utvecklare som arbetar medinformationssäkerhet. Fallföretaget är ett anonymiserat svenskt tillverkningsföretag som tillhandahåller produkter och tjänster inom säkerhetsbranschen. Resultat: Enligt vår studie utgår beslutfattare från tidigare erfarenheter av informationssäkerhet när hanteringsstrategier utformas. Det framkommer även att beslutfattarens resonemang och riskhantering förändras i takt med personens erfarenhet. Vi kan även konstatera att beslutfattarens agerande kan förklaras utifrån prospektteorin och att hanteringen påverkas av kognitiva aspekter såsom övermod. / Background: Every organization needs to manage its information security risks (ISRM) as all industries are exposed to information risks. The purpose of ISRM is to protect information so that it is accessible when needed, reliable and to ensure only authorized access (Informationssäkerhet, 2015). Lack of ISRM may result in data loss or personal data leaks, which in turn may lead to a decrease of consumer confidence and reduced revenue streams. Enterprises exposure to information risks are affected by both internal and external factors. The outbreak of Covid-19 is an example of an external factor (Humla, 2020). According to a report, the Swedish manufacturing industry's management of information risks is severely neglected in relation to other sectors ́ handling of information risks (Radar Ecosystems Specialists, 2017). Purpose: This thesis explores how a Swedish manufacturing company manages its information security risks. This is explored by applying a theoretical framework of Prospect Theory to explain decision makers ́ reasoning behind its current ISRM practices. We are also exploring whether decision makers within IT-security have a tendency towards Overconfidence bias and whether it may affect the company's ISRM. Method: The thesis is a qualitative case study and the empirical data has been obtained through semi structured interviews with decision-makers and developers working with information security. The case company is an anonymous Swedish manufacturing company that provides products and services in the security industry. Results: According to our thesis, decision makers rely on previous information security experiences when designing management strategies. It also appears that the decision maker's reasoning and risk management change as the person's experience. We can also note that the decision maker's behavior can be explained on the basis of Prospect Theory and that the ISRM is influenced by cognitive aspects such as overconfidence.

This thesis analyzes and evaluates the relationship between insider trading and the long-term stock performance of Initial Public Offerings (IPO) in Sweden. The study looks at firms that recently conducted an IPO and how the stock performance of the firm is impacted by insiders making transactions in their own stock. An IPO is known to generate high returns on its first day on the public stock market, but to underperform the market in the long term. The characteristics of an IPO are deviant from the rest of the stock market, and with less information available to the public compared to other firms, the IPO market is hard to navigate for investors. Transactions made by insiders in the share of their own company is usually seen as guidance in public companies. An insider purchase is usually followed by a positive stock return, and insiders selling shares have the opposite impact. The aim of this thesis is to investigate if the information provided by insider transactions can be used to create a potential trading strategy for IPOs. Through statistical analysis, a negative relationship is found between the insider trading and IPO long-term stock performance, indicating that insider buying shares are connected to lesser stock performance. This contradicts previous research regarding insider trading in seasoned firms and opens up for discussion. By implementing a theoretical framework, a deeper analysis of the proposed relationship is be made. This study concludes that the negative relationship between insider trading and long-term IPO stock performance is not directly caused by insider trading itself. Instead, it is a result of insiders making poor investment decisions due to outside pressure and behavioral factors.

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