This paper investigates how economics of happiness improves traditional economics and social welfare. If subjective happiness can be used as a proxy of utility, income distribution problem becomes solvable. However, analysis of a time series of subjective happiness is known to result in so-called ‘paradox of happiness.’ Relative income hypothesis together with adaptation hypothesis well explains the paradox, which is also supported in this paper. However, I offer two objections to the paradox. First, I propose a new measure for happiness, which is obtained by asking a change in happiness instead of asking a level of happiness. If we adopt a sum of the change in happiness as the definition of happiness, the paradox may disappear. Second, subjective happiness, which is based on reflection of us, differs from utility, which is based on comparison and choice. What is practically important to our life is the latter, so that paradox of happiness does not necessarily mean that improvement of the standard of life is in vein.

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The purpose of this study is to examine differences in self-evaluation between Japanese male and female employees at the managerial posts. As the results, the total evaluation did not differ between both genders. Analysis of each of 12 self-evaluation items showed the following differences: self-evaluations were significantly higher in females than in males on “execution capacity” and “sense of responsibility,” while those on “extensive knowledge” and “judgment” were higher in males than in females. However, no significant differences were found between males and females on the remaining eight items, i.e., “negotiation skills”, “developing subordinates”, “planning capabilities”, “persuasion”, “expert knowledge/skills”, “leadership”, “creativity,” and “interpersonal-relation adjustment.” In conclusion, this study suggested that the self-evaluation was nearly at the same level between male and female managers.

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Hyperbolic discounting induces dynamically inconsistent preferences among consumers. Hyperbolic consumers are predicted to be more likely than non-hyperbolic consumers to have a higher marginal propensity to consume (MPC, hereafter) out of liquid assets and a lower MPC out of illiquid assets, because hyperbolic discounters are more often liquidity-constrained whether they are naive or sophisticated. I investigate the empirical validity of the hypothesis by using a broad panel survey from “Japan Household Survey on Consumer Preferences and Satisfaction” conducted by Osaka University, 2005-2007. I find that hyperbolic households have actually higher MPCs out of current income than non-hyperbolic households, whereas the MPCs out of fixed assets for hyperbolic households are lower than that of non-hyperbolic households. The asset-specific MPC puzzle could thus be resolved in part by hyperbolic discounting.

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We conduct an experiment using Japanese university students, to investigate differences between men and women in choosing a competitive tournament compensation scheme over a non-competitive compensation scheme. Our findings are the following: (1) Men enter the competitive tournament compensation scheme more than women although there are no gender differences in performance. (2) This gender gap in tournament entry is mostly caused by men being more overconfident about their relative rankings. (3) The male-female ratio of the group affects overconfidence about the relative ranking. Men get overconfident if there are any women in their groups. On the other hand, women get overconfident if no men are in their groups. (4) Gender differences in preferences for competition weakly affect the gender gap in tournament entry given the degree of the relative ranking.

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In this paper, we investigate characteristics of minimum variance portfolios (“MVP”) and market-cap weighted portfolios (“CWP”), using data for a number of stock markets in developed countries. We show performance of MVPs is more efficient than CWPs for most of these countries. Furthermore, we construct volatility-ranked portfolios of Japan stocks and demonstrate that stocks with high volatility tend to underperform. We provide evidence that risk / return are not a trade-off.

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We analyze the existence of disposition effect by examining the relevance between pricing and trading volume (turnover ratio of trading) just after IPO. As many as 809 firms are investigated, which went public on JASDAQ, Mothers and Hercules, which are Japanese IPO markets, between September 1997 and December 2004. The sample is suitable to verify disposition effect because individual investors play relatively major role in those markets. We confirm that IPOs with positive (negative) initial return are associated with the significantly high (low) trading volumes, and that the initial return has positive correlation with trading volume. Additionally we find that firms with negative initial return at the outset are actively traded when they surpasses the offer price.

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We conduct an empirical study of investigating determinants of historical average returns in Chinese Stock Markets. The method of study is sorting stocks according to ex ante attributes of stocks, making portfolios using the size of the attributes, and observing their performances afterward. As a result, we find a strong relationship between past maximum returns and average stock returns afterward. From this finding we conjecture that individual investors who cannot make large portfolios and diversify risks are likely to overestimate the value of stocks with large past maximum returns. It makes performance of those stocks worse than stocks with small past maximum returns. This fact suggests that there exists irrational investment behavior in Chinese stock markets.

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Most previous American and European studies did not show any statistically difference in the performance of SRI (Socially Responsible Investment) funds and conventional funds, even though the investment universe of SRI funds are limited. It is difficult to say which one’s performance is better. However, SRI funds with its evalution based on the CSR (Corporate Social Responsibility) is thought to have a different behavioral pattern (investment style) than conventional funds.
In retrospect, we examine whether we could find any significant difference of investment style between SRI funds and conventional funds. For this purpose, we define the exposure of Fama-French Three Factor Model to funds as investment style. Then we anaylzed 12 month rolling exposure difference of Market factor, Size factor and book-value-to-price factor between SRI funds and conventional funds, both invested in domestic equities, in the same investment company. The result of anaylsis is that the investment sytle of SRI funds isn’t always different with conventional funds between investment companies.

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One source of income is used for a different expenditures or savings by the existence of mental accounting. According to Thaler(1999), mental accounting is the set of cognitive operations used by individuals and households to organize, evaluate, and keep track of financial activities. A survey of 523 people was conducted in one rural area of China on mental accounting. After analysis, results of the survey evidently show that, mental accounting exists in the households of farmers. Also, factor analysis and cluster analysis show that Incomes are grouped into 6 categories, and expenditures are grouped into 5 categories, and savings are grouped into 4 categories respectively.

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To complement the theoretical analysis on the self-control problems of decision makers, this paper empirically examines a remedy for procrastination. The setting for our study is university coursework, and we utilize unique data on daily records of self-directed learning activities. With quasi-experiments arising from the different frequency of interventions across classes, we examine the hypothesis that in-class prompts by an instructor mitigate the degree of procrastination. Further, with a registration mechanism that generates the grouping of students by their own preference, we consider whether student-class matching affects students’ responsiveness to prompts. In a sample of Japanese undergraduates, we find that prompts affect behavior, especially when reinforced. The impact of intervention, however, appears to be dependent on the class preferences and the timing of prompts. The study suggests that a minimally interventionist policy may have real impact but may fail to influence target groups.

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[in Japanese]

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In stark contrast with academic works, there are only a few cases where behavioural economics (BE) is applied to institutional design in the policy arena, although the potential of its applicability is huge, particularly in the area of benign paternalism including. The structural factors that do at present and/or could in the future prevent BE from being used in the policy discussion include (i) the very nature of BE that it is not so much normative as positive, (ii) the government failure in that policymakers as well as consumers suffer from psychological biases, (iii) moral issuesarising when policymakers use or even exploitconsumers’ biases, and (iv) the innate diversity and context-dependency of behavioural patterns which would make parsimonious analysis difficult. The above argument implies the importance of applying BE to policy making in a deliberate and incremental manner.

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We conduct a novel virtual stock market experiment that aims to investigate the motives behind short-term investment behavior at the individual decision-making level. In particular, we focus on individual investors trading strategies in response to public information —about prices, macroeconomic news, and relevant individual-stock information. The distinguishing feature of our experiment is the use of factual contemporaneous news items directly related to the stocks in subjects’ portfolios. We were able to obtain a few interesteing information-related results: (i) more information leads to more frequent trading; (ii) while shorter trading horizon results in more orders and in more overall information usage, the average amount of information used per decision does not differ with horizon length; (iii) majority of trading is of the positive-feedback type —following individual stock prices and the market as a whole; (iv) the shorter the trading horizon, the more pronounced is the positive-feedback effect. We also examined the motives behind specific buying and selling decisions: our subjects’ investment decisions are driven largely by psychological motives; in particular, regret aversion is a habitually common reason for trading and for not trading —through the disposition effect.

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This paper discusses the tough love model of intergenerational altruism we developed and some of on-going empirical research on tough love behavior in survey data collected in Japan and United States. The tough love model modifies the Barro-Becker standard altruism model in two ways. First, the child’s discount factor is endogenously determined, so that low consumption at young age leads to a higher discount factor later in her life. Second, the parent evaluates the child’s lifetime utility with a constant high discount factor. The tough love model predicts that transfers from the parent will fall when the child’s discount factor falls. This is in contrast with the predictions of the standard altruism model that transfers from parents are independent of exogenous changes in the child’s discount factor. In the empirical work, the hypothesis that parents’ tough love behavior is affected by their worldviews is investigated.

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Myopic loss aversion, which indicated by Benartzi and Thaler (1995), is investor’s irrational behavior which could influence market efficiency in financial market. This paper measures myopic loss aversion in Japanese financial market and also compares with U.S. market. As a consequence, it indicates inefficiency of Japanese financial market.

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[in Japanese]

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[in Japanese]

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[in Japanese]

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This paper reports one economic experiment using game theory concerning golf course membership marketing transactions, focusing on asymmetric information about the price of memberships in the market and the financial conditions of the golf club. In the experiment, using the ultimatum game, college students took the roles of golf club owners and members. We compared the negotiation processes of owners and members according to whether or not information regarding the financial conditions of the golf course was disclosed to members. The results of the experiment indicated that asymmetric information influences negotiations among stockholders regarding golf club memberships. The present finding suggests that game theory and economic experiments have useful applications in the field of sport marketing.

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