Neural implications of investment banking experience in decision-making under risk and ambiguity
Ortiz-Teran, Elena; Ortiz, Tomas; Turrero, Agustin; Lopez-Pascual, Joaquin. (2019). “Neural implications of investment banking experience in decision-making under risk and ambiguity”. Journal of Neuroscience, Psychology, and Economics, Jan 28 , 2019.
Financial decision-making is governed by cognitive and emotional processes. However, it is possible to learn how to manage both before making a decision based on experience. Electroencephalography might provide some insight into what is behind these choices by analyzing the slow negativity preceding a risky decision, known as the decision preceding negativity (DPN). The DPN is involved in cognitive processes associated with the elaboration of the planned response as well as the anticipation of the affective motivational stimuli. Using monetary gamble under risk (outcome probabilities are known) and ambiguity (outcome probabilities are unknown), we studied the DPN in a group of investment bankers, to see if individual financial experience influences anticipatory potentials that precede choices. Our results showed that investment bankers are able to shorten their anticipatory decision-making process by having a DPN closer to motor response. As this occurs, the prefrontal and orbitofrontal brain areas under risk were activated due to the role that emotions play in financial decision-making. On the other hand, under the ambiguity condition, activation of the prefrontal areas was caused by cognitive regulation of emotion. Our conclusion is that financial experience also influences risky choices by shortening the decision-making process while balancing cognitive and emotional processes, which depend on the amount of missing information. (PsycINFO Database Record (c) 2019 APA, all rights reserved)
Preferences over sequences of payments: A new validation of the q-exponential discounting
Salvador Cruz Rambaud, Joaquín López Pascual, María de los Ángeles del Pino Álvarez. (2019). "Preferences over sequences of payments: A new validation of the q-exponential discounting" Volume 515. Physica A: Statistical Mechanics and its Applications-Journal-Elsevier. pp 332-345
The preference for incremental gains, or the improving sequence effect, has been presented as one of the most important anomalies in intertemporal choice. Usually, the experiments to verify this effect have been based on sequences of incomes, and most of them have shown a preference for an increasing sequence. The objective of this paper is to analyse this topic in the context of loan repayment plans where a preference for constant and decreasing over rising payments is expected. The methodology applied in this paper is based on the use of questionnaires in the same way as Hoelzl et al. (2011) to evaluate different loan plans with the same interest rates and durations. It clearly shows that people prefer those plans which repay more at the beginning of the loan duration. Thus, the main contribution of this paper is the use of the q-exponential discounting to explain this revealed decreasing sequence effect because the q-exponential discount function can exhibit the inconsistency in intertemporal choices based on a decreasing interest rate. Finally, recommendations are made for banking institutions when considering their strategies of interest rate offers in the context of bank marketing.
On asset managers, hedge funds and ETFs
Joaquín López Pascual, Santiago Camarero Aguilera (2017). Nº14 "On asset managers, hedge funds and ETFs", in The IEB Aestimatio. International Journal of Finance, pp 26-45
The returns generated by the traditional asset management industry do not justify the current fees charged. An "excessive" reward for the risk taken leads to the assumption of disproportionate risks and to a non-efficient allocation of resources. This situation has been become more evident with the appearance of low-cost index-tracking funds, such as exchange-traded funds (ETFs) and robo-advisors, which are favoured in the current low-return, low-volatility and high-correlation investment climate. However, the market cannot be entirely made up of index funds with no discrimination; this would ultimately lead to a massive misallocation of capital.
In this context, the traditional asset management and hedge fund industries need to evolve and adapt to the new environment that requires more transparency, lower fees and new pay structures with more robust set ups.
Big Data and Earned Value Management in Airspace Industry
An Overview of Earned Value Management in Airspace Industry
Joaquín López Pascual, Juan Carlos Meléndez Rodríguez, Pedro Cañamero Molina, Fausto Pedro García Márquez. (2016). "An Overview of Earned Value Management in Airspace industry", in Proceedings of the Tenth International Conference on Management Science and Engineering Management. Ed. Springer. pp 1465-1477.
Earned value management (EVM) is an effective Project management approach. This method is used to manage Project of different sectors and has been revised to improve its Schedule estimates, the Earned Schedule Management and the Earned Duration Managemente and to include new components as quality, the quelity earned value management. This paper explores the EVM methodology and proposes a model to manage projects aerospace engineers based in a real case study. The inputs in the model are the planning and the monitoring of the case study, planned value, earned value and actual cost of aerospace projects.