[in Japanese]

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[in Japanese]

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This paper examines the effect of regret aversion on trading strategy and information aggregation in a dealer market with asymmetric information. Although the market maker adjusts asset price according to all available information through Bayesian learning, informational cascades can still occur: informed traders herd to buy when the price is extremely high, while they herd to sell when the price is extremely low. This model overcomes the so-called “price critique” in a simple framework. It also implies that the interaction between investor psychology and rational herding may be an important factor causing bubbles and crashes in security markets.

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The concept of asset management for the corporate pension fund in Japan has changed remarkably in recent years. That is, the asset allocation restriction by book value was abolished in 1997, and instead of this restriction, the concept of fiducially responsibility had introduced and risk management by the policy asset allocation of a traditional assts had been adopted. Though the trend of performance following was observed in the early stage of policy asset allocation from 1998 to 1999, this trend was removed to some degree in the established stage of policy asset allocation from 2000 to 2002, when the stock market was declining. However, risk management by the policy asset allocation doesn’t work well since an increase of the style risk in a traditional assets and diversified investments to the alternative investments such as hedge fund, etc. In this study, I proposed a method of risk management by the systematic risk factors as excluding the tendency of performance following and as avoiding a similar investing to hedge funds in a perspective of behavioral finance.

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Investor confidence affects financial markets. Information, noise, market frictions cause investor confidence to influence security prices, leading to a price different from the rational expectations value. This paper presents a simple theoretical model of asset prices where investor confidence is allowed to differ across traders, and across time -depending on observed outcomes. The presence of short-sales constraints causes asset prices to behave asymmetrically: short-run returns display reversal after good news, but momentum after bad news. This can change somewhat if investor confidence varies because of biased self-attribution: good news causes returns to exhibit short-run momentum and long-run reversal. We also investigate the extent to which asset supply affects the price paths. In case of zero net supply the equilibrium prices are set unilaterally by either of two investor groups. Yet if we allow for positive asset supply we find an intermediate range of information signals and resulting prices consistent with both trader types being active in the market -this happens if news events are moderate. We further identify the shrinkage effect: the range of signals where both groups of traders have positive asset demands may shrink in subsequent trading due to biased self-attribution.

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This paper analyzes the income inequality, based on government income statistics and an attitude survey. First, the paper describes the present income inequality in Japan by using the Gini coefficients, and the income share of the top and bottom income classes. Second, by employing the Japan-U.S. international survey, this paper analyzes the cause of the increasing awareness that Japan’s income gap is widening. Between these two countries, their distinct value judgments about the causes for the gap influence how they perceive it. The Japanese have negative perceptions about the income gap when they perceive it to be influenced by talent, academic background or luck, and this perception seems relatively uncommon in the U.S. A large percentage of Japanese also think one’s income is decided by talent, academic background or luck, although it should not be. Such disagreements between the desired and perceived determinants of income are thought to raise their perception of the gap.

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[in Japanese]

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[in Japanese]

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Satisfaction with preliminary injunctions (PIs) exceeds satisfaction with merits in the Japanese civil courts. This has resulted in the ratio of the ongoing merit process of PIs being below the appeals ratio of merits. Apparently, the more accurate and cautious examination given in the merits court is not easily accepted, while the faster and simpler decisions of PIs are accepted. This may be because of the costs of legal processes for PIs and merits. Furthermore, given the low probability of winning a suit in an appeals court in practice, the approach of behavioral economics is recommended in this situation.

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[in Japanese]

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[in Japanese]

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[in Japanese]

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This paper analyzes the household data of Japanese hig-income earners to estimate the effect of a change in asset level on the relative risk aversion (RRA) and a household portfolio choice. The analysis first estimated the coefficient of relative risk aversion of each respondent of survey questions. It second estimated the relationship between asset level and RRA and the one between asset level and the proportion of risky assets in the total household asset, using the bequest and gift as the instrumental variable of asset level. The main results are as follows. First, RRA decreases as an asset becomes greater. Second, the proportion of risky assets depends on RRA; however, it cannot be regarded as dependent on the asset level. Those two results imply that an increase in the asset size raises the proportion of risky asset through the decreasing RRA.

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We formulate a monitoring model of a situation where a principal (an inspector) verifies that an agent (an inspectee) adheres to a level of effort. We incorporate belief-dependent payoffs, guilt feelings and reciprocity, into the payoff of the agent. We examine the impact of incorporation of belief-dependent payoffs on the error probability that the principal conducts a costly investigation into a level of effort chosen by the agent although the agent chooses a desirable level of effort for the principal. It is known that theories equipped with these belief-dependent payoffs explain stylized facts of a wide range of experimental games. We find that, however, in our model each belief-dependent payoff has different impact on the error probability from each other. Moreover the belief-dependent guilt feelings reduce the error probability and for any error probability the agent with reciprocity has an incentive to choose undesirable level of effort for the principal.

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