Kim Kaivanto

• Lancaster University

Certain classes of system-level risk depend partly on decentralized lay decision making. For instance, an organization's network security risk depends partly on its employees' responses to phishing attacks. On a larger scale, the risk within a financial system depends partly on households' responses to mortgage sales pitches. Behavioral economics s...

Forward-looking information about climate risks is critical for decision makers, but the provision and accuracy of such information is limited. Innovative prediction-market designs could provide a mechanism to enhance applied climate research in an incentive-compatible way. Read-only full-text available from publisher here: https://rdcu.be/cUMH6

Normative decision theory proves inadequate for modeling human responses to the social‐engineering campaigns of advanced persistent threat (APT) attacks. Behavioral decision theory fares better, but still falls short of capturing social‐engineering attack vectors which operate through emotions and peripheral‐route persuasion. We introduce a general...

The creation of a new business is an act of entrepreneurship. It is also a financial undertaking. Hence it is admissible to apply the apparatus of behavioral finance to study the determinants of business formation. Our results show that aggregate US business formation, nationally and regionally, is jointly predicted by economic fundamentals and sen...

There is not a uniform view of the link between cyber risk and systemic risk: some assume a direct link whereas others query the connection. Beyond nation states, the vast majority of independent cyber attackers are currently unlikely to have the capability to systemically impact the financial sector. The financial sector has a large number of en...

Predicting future climate requires the integration of knowledge and expertise from a wide range of disciplines. Predictions must account for climate-change mitigation policies which may depend on climate predictions. This interdependency, or “circularity”, means that climate predictions must be conditioned on emissions of greenhouse gases (GHGs). L...

Prediction markets use a betting-like mechanism to aggregate information from disparate sources to produce probability forecasts that represent the collective view of participants. They have similarities with financial markets but are designed specifically to discover information rather than transfer assets or risks. Contracts that pay out a fixed...

We construct a sentiment indicator as the first principal component of thirteen emotion metrics derived from the lyrics and compositional attributes of music-chart singles. This indicator performs well, dominating the Michigan Index of Consumer Sentiment and bettering the Baker-Wurgler index in long-horizon regression tests as well as in out-of-sam...

Investor sentiment's effect on asset prices has been studied extensively --- to date, without delivering consistent results across samples and datasets. We investigate the asset-pricing impacts of eight widely cited investor-sentiment indicators (one direct, six indirect, one composite), within a unified long-horizon regression framework, predictin...

Many philosophers have challenged the ideal of value-free science on the grounds that social or moral values are relevant to inferential thresholds. But given this view, how precisely and to what extent should scientists adjust their inferential thresholds in light of non-epistemic values? We suggest that Signal Detection Theory (SDT) provides a us...

Normative decision theory proves inadequate for modeling human responses to the social-engineering campaigns of Advanced Persistent Threat (APT) attacks. Behavioral decision theory fares better, but still falls short of capturing social-engineering attack vectors, which operate through emotions and peripheral-route persuasion. We introduce a genera...

Normative decision theory proves inadequate for modeling human responses to the social-engineering campaigns of Advanced Persistent Threat (APT) attacks. Behavioral decision theory fares better, but still falls short of capturing social-engineering attack vectors, which operate through emotions and peripheral-route persuasion. We introduce a genera...

There were many warnings portending the Great Financial Crisis (GFC). Filtering by strict admissibility criteria -- (i) direct, (ii) explicit, (iii) credible, and (iv) documented -- we identify no fewer than 28 warnings between 2000 and April 2007. Including private and commercial communications (e.g. of hedge funds taking positions in mortgage-lin...

Airlines and their customers have an interest in determining fuel-and emissions-minimizing flight segmentation. Starting from Küchemann's Weight Model and the Breguet Range Equation for cruise-fuel consumption, we build an idealized model of optimal flight segmentation for maximizing fuel efficiency and minimizing emissions under the assumption tha...

The institutional analysis and development (IAD) literature finds that Nash equilibrium predictions are empirically falsified in the social dilemmas that arise in community-level natural resource management problems. However, Nash equilibrium is not the only solution concept within noncooperative game theory. Here we demonstrate the power of correl...

Incomplete preferences displaying ‘mildly sweetened’ structure are common, yet theoretically problematic. This paper examines the properties of the rankings induced by the set of all coherent completions of the mildly sweetened partial preference structure. Building on these properties, I propose an ensemble-based refinement of Hare’s (Analysis 70:...

Many philosophers have challenged the ideal of value-free science on the grounds that social or moral values are relevant to inferential thresholds. But given this view, how precisely and to what extent should scientists adjust their inferential thresholds in light of non-epistemic values? We suggest that Signal Detection Theory (SDT) provides a us...

Fintech business models based on distributed ledgers -- and their smart-contract variants in particular -- offer the prospect of democratizing access to faster, anywhere-accessible, lower cost, reliable-and-secure high-quality financial services. In addition to holding great, economically transformative promise, these business models pose new, litt...

Air transport Greenhouse Gas (GHG) emissions estimates differ greatly, depending on the calculation method employed. Among the IPCC, ICAO, DEFRA, and BrighterPlanet calculation methods, the largest estimate may be up to 4.5 times larger than the smallest. Such heterogeneity – and ambiguity over the true estimate – confuses the consumer, undermining...

In this paper we attempt to recover an integrated conception of the Precautionary Principle (PP). The alpha = 0.05 inferential-threshold convention widely employed in science is ill-suited to the requirements of policy decision making because it is fixed and unresponsive to the cost trade-offs that are the defining concern of policy decision making...

The well-known result that capital structure is irrelevant for firm value follows from a set of assumptions conducive to theoretical analysis. In this note we explore the implications of relaxing one of these assumptions: the independence of cash flows from capital structure. Unlike debt and equity, funding that is accompanied by a royalty payment...

The 2007-08 financial crisis exposed poignant examples of ill-judged risk accretion in both tails of the Lorenz curve: concentrations of inappropriate mortgages within low-income neighborhoods, and concentrations of Bernard Madoff's victims within wealthy, predominantly Jewish country-club communities. These examples share three key elements. First...

Monty Hall is a difficult task which triggers multiple biases. With sophisti-cated subjects and treatments that reverse and eliminate these triggers, non-rational choice is greatly reduced. Among task-familiar subjects, non-rational choice can fall to background-error levels. But as our data also show, task-form recognition is necessary but not suf...

The Institutional Analysis and Development (IAD) literature led by Elinor Ostrom concludes that Nash equilibrium predictions are empirically falsified in the social dilemmas found in community-level natural resource management problems. However, Nash equilibrium is not the only solution concept within noncooperative game theory. Here we demonstrate...

Reduction of compound lotteries is implicit both in the statement of the St. Petersburg Paradox and in its resolution by Expected Utility (EU). Despite the pivotal role of this assumption, to date there has been no empirical substantiation of its validity. We report three real-money experiments in which the compound-lottery form of the truncated St...

NOTE: THIS MANUSCRIPT HAS BEEN SUPERSEDED BY A SUBSTANTIALLY UPDATED VERSION DATED 1 JULY 2019. Whereas the predictability of market returns and the deviation of market returns from funda-mentals have been investigated individually in a large number of studies, few if any have explicitly modelled both jointly. The present work aims to fill the gap...

We report an experiment in which subjects are not indifferent between real-money lotteries implemented with randomization devices that are equivalent under the Reduction Axiom. Instead choice behavior is consistent with subjective distortion of conditional probability, and this persists in treatment conditions that control for (i) computational lim...

To mitigate anthropogenic climate change greenhouse gas emissions (GHG) must be reduced; their major source is man's use of energy. A key way to manage emissions is for the energy consumer to understand their impact and the consequences of changing their activities. This paper addresses the challenge of delivering relevant, practical and reliable g...

Full text available here without paywall: https://www.jclinepi.com/article/S0895-4356(07)00380-0/ or https://www.sciencedirect.com/science/article/pii/S0895435607003800

Two recently-published studies argue that conventional parameterizations of cumulative prospect theory (CPT) fail to resolve the St. Petersburg Paradox. Yet as a descriptive theory CPT is not intended to account for the local representativeness effect, which is known to induce `alternation bias' on binary iid sequences such as those generated by co...

In Europe (and elsewhere) governments intervene to stimulate innovation in the SME sector, and because SMEs face financial constraints in particular, governments encourage the provision of debt and equity (venture capital) finance to such firms. This paper discusses sales contingent claim (SCC) backed finance – funding secured only on a claim writt...

The extension of adjustment assistance to those who have suffered trade-related job displacement is widely supported on both sides of the economics of globalisation debate. The form that such assistance should take, namely wage insurance, is also the subject of wide agreement. Nevertheless, the formal economic rationales offered for such a policy a...

Two recently published studies argue that conventional parameterizations of cumulative prospect theory (CPT) fail to resolve the St. Petersburg Paradox. Yet as a descriptive theory CPT is not intended to account for the local representativeness effect, which is known to induce 'alternation bias' on binary iid sequences such as those generated by co...

Launch Aid has crucially facilitated civil aerospace product development efforts in the UK. Currently Launch Aid figures centrally in the charged international dispute over civil aerospace subsidies, in which it has been characterized variously as an instrument of infant industry policy, technology policy and strategic trade policy. Yet surprisingl...

Even if firm type is publicly known, relationship intermediaries obtain an informational rent, formalized as a compound quasi-option sequence, when each rollover decision is conditioned on a private signal of next-period success. The relative performance of this signal extraction apparatus forms a natural measure of relationship ‘closeness’.

In the context of coin tossing, the local representativeness effect gives rise to alternation bias, whereby negatively autocorrelated sequences are perceived as maximally random and the runs characteristic of unbiased memoryless Bernoulli processes are perceived as being excessively regular to be random. Thus as a consequence of the local represent...

The simple cash flow definition of profit, i.e. the pass-through dividend payout policy, is a standard workhorse of economic analysis. Nevertheless it is well established that firms smooth their dividend payouts and generally resort to dividend cuts only as a last resort. Thus far these empirically observed Lintner-style smoothed dividend equity sh...

Frequently, public expenditure on R&D (Research and Development) is justified with high-profile spin-off success stories. Such arguments invariably commit to a particular, though not necessarily explicit, sense of spin-off. Notwithstanding the spin-off arguments’ persuasive success in public discourse, their effectiveness in making the case for eco...

This Paper studies the criteria with which the presence or absence of ‘subsidy’ in sales contingent Launch Aid R&D support may be determined when payoff-relevant market incompleteness limits the precision of market-based pricing to non-trivial intervals. The criteria currently employed in WTO and EU proceedings are consistent with correct accountin...

Relationship intermediaries specialise in alleviating information asymmetry, but the literature remains vague on precisely what information they acquire and how they put such information to use. This paper characterises explicitly a particular class of signal extraction and studies the optimal funding policy that maximises the associated informatio...

The aggregate of CARA individuals' beliefs takes the form of a logarithmic opinion pool in both market (composite market beliefs) and non-market (syndicate surrogate beliefs) settings. This paper shows that logarithmic opinion pools violate a minimal consistency requirement between individual- and aggregate-levels: the unanimity preservation proper...

It is argued that in Europe (and elsewhere) governments intervene actively to stimulate the SME sector, and because SMEs face financial constraints in particular, governments encourage the provision of debt and venture capital to such firms. We discuss a particular form of finance - funding secured only on a claim written on sales, i.e. Sales Conti...

Compared with the amount of interest Launch Aid has generated over the years, disproportionately little factual data has informed public policy debate. Information entering the public domain has arrived in piecemeal fashion, resulting in considerable disparities between sources. While Launch Aid has figured prominently in post-war UK civil aerospac...

Current economic models of absenteeism derive pro-cyclical properties from cyclical variations in the costs and consequences of absence. Through an extension of the household production model, this paper proposes a complementary approach based on variations in forgone earnings associated with work-commodity itself.

The Self-Efficacy Scale (SES) has been found to predict isokinetic performance better than anthropometric variables. This study tests the predictive power of SES further against other measures of efficacy expectancies as well as measures of depression and perceived disability. A group of 105 chronic back pain patients was administered Beck's Depres...

This re-analysis was based on 833 computed tomography/discograms collected from 306 candidates for back surgery. The goal was to test the hypothesis that outer anular ruptures are the main determinant of the pain of discography. Previous analyses indicated univariate associations of pain with disc degeneration and anular ruptures. If present, pain...

This study investigated how age, sex, height, body weight, self-efficacy beliefs, pain, and subjective disability predict the performance of low back pain patients on an isokinetic trunk muscle test. One hundred and five patients participated in the study. Dependent variables were isokinetic flexion and extension strength measured as total work don...

The objective of the investigation was to study the course of neck and shoulder symptoms and the predictors for these symptoms among women in light sedentary work. Postal surveys were conducted among 351 tellers (age 20-50 years) of a bank company in September, December, March, and May. The response rates were 74-90%. The outcome was the frequency...