Imperialism and Capitalism

Imperialism which is often considered to be a final stage of capitalism was a logical continuation of industrialization, development of trade and colonization. Global trade and goods exchange have united Europe, Africa, America and Asia into an integral organism. Imperial system as well as interaction between the major colonial super-powers guaranteed economical stability and peace. Colonies were perfect markets for the goods produced in metropolises and were used as emergency zones in cases of overproduction in order to prevent global or local economical crisis. Colonies were used as raw material donors of metropolitan industry. In order to prevent movement for political and economical independence, colonies were not allowed to have industrial objects as their economical activity was limited to farming and mining. On the hand with traditional colonial system which took place in France, Great Britain, Belgium which had huge possessions worldwide, American imperialism had introduced a new one without any formal colonial possessions. American imperialism was different from British and French as it penetrated into independent countries, making their single-sector economies be dependent upon the price policies set by American corporations. American imperialists used different methods in order to widen their spheres of influence in western hemisphere: bribery of corrupted officials, aiding political opposition of unwanted regimes and even open intervention by American troops which always ended with establishing of puppet governments. These methods were used on Philippines, Cuba, and Puerto-Rico. The effects of imperialism are quite different both for colonies and imperial metropolises: from one side goods exchange ensured economical stability, from the other side imperial ambitions of superpowers resulted WW1. Colonies experienced mostly negative impacts: industrial backwardness, dependence upon metropolises, poverty, social injustice and discrimination. Of course the appearance of imperialism as a new world order at the beginning of the twentieth century had provoked continuing discussions about its real impacts on civilization. Contemporaries either supported imperialism or sharply criticized it. Kipling, for example, insisted that imperialism was a logical continuation of civilization progress and it was vital in order western civilization to survive, as it prevented it from economical and social crisis, guaranteed goods exchange, development of trade and stability in western world. This concept is rather conservative as Kipling also supports the idea of racial and cultural superiority of western civilization and this factor is considered to be justification of colonial expansion in his theory. On the other hand such authors as Hobson consider imperialism to be one of the alternatives to economical development which has a global character and is resulted by concentration of wealth within one country. Hobson argues that in order world economy to develop, this wealth has to be distributed overseas as it will promote development of both economies: metropolitan and colonial. The growth of anti-imperialist movement was resulted by its destructive influence on colonial countries which appeared to be in total dependence from imperialist states. Anti-imperialist movement took place in India, China, and Latin America. In fact the accident which led to WW1 had also anti-imperialist background, as Serbian revolutionaries were afraid that Serbia will become a dependent territory of Austria-Hungary. The results of WW1 were contradictory for different countries. Four European empires: Germany, Austria Hungary, Russian and Ottoman Empire collapsed in 1918 when the war was over. Moreover, prolonged economical and social crisis caused by the 4 years of bloody war had resulted a series of revolutions and public unrest world wide, changing political orientation of many countries. Bolshevik revolution in Russia brought to power a small group of political radicals led by Vladimir Lenin, who started to build a new order in semi-feudal country according to Marxist ideas of equality, abolition of private property and establishment of proletariat dictatorship. Tsarist regime was substituted by a new radical ideology of communism which was alien to Russian peasants and middle class. The years of prolonged terror, artificial hunger, repressions had changed the country and had changed people†s mentality to the mentality of oppressed people who was living under dictator†s rule. A new Soviet nation was raised in the fear of capitalist world, in the fear of the possible threat from the side of international capitalism and in constant preparation for war. Actually the premises for future cold war originated in interwar period and foreign intervention against Soviet Russia in 1919-1921 had only deepened fear of Soviet people. Stalin, a new leader of Communist party had created his own doctrine of socialist state. Rapid industrialization and collectivization in agricultural sector had changed country†s economy, making it stable and more advanced. In fact, Communist Russia was the only country which experienced economical growth starting from middle 1920†³s and going all the way to 1941, whiles the world of capitalism was suffering from global economical crisis. Communism became a potential threat for capitalist world and the USSR had become an ideological enemy of the West. Stalin understood it quite well and was getting ready for a possible war. Industrialization and militarization of economy were essential in order to survive and provide security to the country. As the power of the Soviet Union grew, it became obvious that it would have territorial ambitions for the spread of communist ideology worldwide. Prosperity in major European countries and in the USA in early 1920†³s was contrasted by deep economical and social crisis in Germany and Italy. The conditions of Versailles treaty had imposed unbearable obligations on Germany as the government of Weimar republic had to pay huge reparations to victors of WW1. Besides, ruined infrastructure of Germany lacked mineral resources and industry as Germany lost the region of Saar, Alsace-Lorraine and several major seaports on the coast of the Baltic Sea together with several colonies in Africa and Asia. The country had no opportunity for development; new democratic government failed to rebuild country†s infrastructure, only irritating people and provoking social unrest. Humiliated nation wanted revenge and retreat. Liberties and democratic freedoms of Weimar constitution were not popular as the nation felt nostalgia about the time of iron order and international respect. Crisis of Weimar republic turned into growth of nationalism and chauvinistic ideas, supported by common people and former WW1 soldiers and officers who were left forgotten by government. This is the main explanation of fascism success in Germany. Crisis in Italy had many similar features to German one. Unemployment, poverty and social unrest in early 1920†³s had created a favorable climate for the rise of Benito Mussolini, the leader of a new party formed by WW1 soldiers and officers who were irritated by economical crisis. Mussolini†s populist ideas were close both to common people ans to upper classes as he promised social stability and order. Mussolini†s political program was successful in 1920†³s and in early 1930†³s as he stabilized economy, solved major social problems of poverty, unemployment and other social vices and returned self respect and pride to Italian nation. His government controlled media, regulated economy and social life of the country. But at the same time Mussolini revealed militaristic ambitions of fascist Italia- intervention and capture of Abyssinia is the best proof of it. War in Abyssinia was not the only conflict fought after the WW1. On the Far East, Militarist Japan started intervention against Manchuria in 1938. These conflicts have shown the weakness of League of Nation, organization which was created in order to preserve peace and prevent wars and local conflicts. Economical crisis on the hand with disintegration of the capitalist world and growing threat from ideological enemy of capitalism-the USSR demonstrate the complicated system international relations in inter-war period. The results of WW1 became obvious after the 20 year period: 2 totalitarian states (the USSR and Nazi Germany) which had colonial ambitions stood against disintegrated democratic world, which was to weak to resist aggression of these two superpowers. The inter war period in the world history is characterized by three different concepts of state development: communist, fascist and traditional democratic. Even though they are hostile, each was successful on a certain stage of development as it had taken ruined Russian empire, Germany and the USA out of economical crisis and had returned confidence and stability to their peoples. After Bolsheviks revolution in Russia, former empire was turned into a new state ruled by the Communist Party. Communist party of the USSR had made radical changes realizing Marxist ideas about revolution and dictatorship of proletariat: abolition of private property, nationalization and equality of all citizens. Understandably in a patriarchal agricultural country with underdeveloped industry and ruined economy any idea about a strong state of proletariat (working class) would fail, but not in Russia. Stalin, who became the head of the communist party in 1928, had his own plan how to reform economy: he proclaimed a course on rapid industrialization and collectivization of farming enterprises. In order to achieve development of industry he performed redistribution of property, expropriating agricultural products from peasants and making them work in kolkhozes (collective state owned farms). In fact he turned free farmers into state slaves who had no property and had to work on state farms in order to survive. This cruel and inhuman practice gave the opportunity to develop heavy industry; mining and it gave the opportunity to start militarization. These results were achieved by numerous victims of innocent people who suffered from repressions and great purges as Stalin†s regime eliminated anyone who had another opinion on the destiny of the country. The total number of Stalin†s victims exceeds 20 million people. So what were his achievements? In quite a short period (20 years) Russia was turned into an industrial state with developing industry and one of the strongest armies in Europe. Society had changed as it was developing according to a socialist model. State was the only power in the country, state was the only property owner. Citizens in majority were nearly equal; the difference between those who had the highest and the lowest income was not really distinct as in capitalist world. In fact, state provided a working citizen with essential facilities for living and guaranteed basic social and medial care. People got the facilities in order to work good enough but nothing else. The order in the country was realized by a total control of media, press and oppression of any potential opposition. Communism substituted religion as the official religion of communist state was atheism, communist party controlled all spheres of life, which led to the isolation of the country. Free market was substituted by barter within the country and market relations were substituted by planned economy.. From historical point of view, the politics of Stalin, even being brutal and inhuman, was justified by historical need, as in order to survive and not collapse, Soviet Russia had to become a super power with a strong army and developed industry from an out-dated, semi-feudal empire with ineffective state management and corrupted aristocratic government. The main weakness of Stalin†s Russia was that the only condition under which the country could stand and continue its development was the policy of terror and oppression of any potential threat in the face of political opposition. Such kind of regime, based only on suppression of human individualism, collectivism and isolation from the rest of the world would definitely fail if some liberties were allowed. So if to look on the history of the Soviet Union starting from Nikita Khrushchev we will see the gradual decline of totalitarian empire, which collapsed in 1991. Another example of totalitarian state of inter-war period is Nazi Germany. Nazi Germany led by Adolph Hitler embodied fascist ideas about a strong state with iron order. Hitler†s phenomenon was a direct result of Versailles Treaty consequences for after war Germany. Humiliated nation, which suffered the burden of huge reparations, deep economical; depression and social crisis caused by ineffective politics of democratic government of Weimar republic wanted the only thing retreat and revenge. So chauvinist and radical ideas of Nazis have succeeded. Germans saw a leader in Hitler, who promised return international respect and prosperity to the nation. Hitler†s political program was very simple and it satisfied Germans fully. Hitler promised descent work to workers and guaranteed protection of private property to businessmen. But his political program was also based on racial hatred, anti-Semitism, blind chauvinism and aggression. Nazis used nearly the same methods of oppression Stalin practiced during â€Å"great purges†, but they focused on ethnic non-German minorities, Communists and political opposition to Hitler†s national-Socialist Party. German economy during Hitler†s regime was also state regulated, as the owners of industrial objects had certain obligations: they had to provide decent wages to workers and had to fulfill industrial state orders. Hitler had changed economy, he made it military oriented preparing the nation for a war. Social life during Nazi regime was also subjected to total control, fascist government controlled media, eliminated political opposition, persecuted ethnic minorities, which turned into Holocaust and genocide during WW2. Hitler†s regime which had to solve racial and territorial question was inhuman and contradicted modern human consciousness. It had to be stop anyway by international coalition, otherwise the absurd and paranoia of one man would cause a world human tragedy. The methods of state regulation were also present during Roosevelt†s office even though he represented a free democratic country living under the laws of capitalism. Roosevelt†s New deal was a set of reforms and a set of measures taken in order to relief the affects of the Great depression. State regulation over prices, control over banks activity and other measures had strengthened economy, getting the country of crisis. Nevertheless, despite the terrible affects of economical crisis and Great depression the USA stood and recovered. Comparing social and economical situation in the USSR, the USA and Germany in inter-war period we may find several similar features in activities of their governments. All of them provided social programs for citizens in order to guarantee realization of basic human living needs: health care, education, social protection and basic welfare programs. All three political regimes used state control over economy, which never used before. But in comparison to the USA where it had a temporary character, Germany and the USSR used it as an integral method of state administration which guaranteed stability and security.

Essential Questions

While the North veered toward a mechanical future of efficiency and invention the Southern dependence on their cotton industry kept them at a stand still. By 1877 prior t o the compromise which ended Southern Reconstruction the Southern economic system was in a steady decline as emend for cotton slowly shifted while the North's demand for manufactured goods continued its steady incline. Peopling: How did the growth of mass migration to the United States and the railroad a effect settlement patterns in the cities in the west?The growth of mass migration to the United States caused massive population n changes which tended to slow as immigrants settled into large towns and cities near or center red around the growing railroads which promised life and fortune to the prospective America Politics and Power: Why did the attempts at compromise before the war fail to prevent the inflict? To what extent and in what ways, did the Civil War and reconstruction n transform American political and social relationships?The attempts at compromise failed because no politician was ever able to full y address the issues of slavery in a way that would last forever. Plus the fact that no Southern nerd was willing to give up their way of life because of a northerner who did not know t he value of slavery. America in the World: How was the American conflict over slavery part of larger global events? As the European powers grew and left slavery for industry America was the la SST of the powers to attain a patch of slavery slowing the turn towards industry.With growing ball Zionist movements the views of the world focused on slavery in the south. Environment and Geography: How did the end of slavery and technology and military developments transform the environment and settlement patterns in the so the and the west? At the end of the civil war with the end of slavery and the introduction of milt ray rule to the south there was a massive change in settlement as freed slaves began travels Eng throughout the south to find lost loved ones. Introduction of â€Å"modernized military tactics and other technologies lowed the flow of populations within the American South.Ideas, Beliefs, and Culture: How did the doctrine of manifest destiny affect debates over territorial expansion and the Mexican war? How did the Civil War struggle shah pep Americans beliefs about equality, democracy, and national destiny? The doctrine of Manifest Destiny caused a lot of debates concerning the right of American expansions in the west while all other countries could no longer claim any of t he land. The results of the civil war molded and enforced American belief in the divinity of their actions of spreading democracy from ocean to ocean. Essential Questions Europeans even knew about the Americas, Native American tribes were the first inhabitants. These first inhabitants were a people group united by kinship and called Pale-Indians and they settled in the Americas between twelve and fifteen thousand years ago. Large mammals and an abundance of plants drew hunter- gatherers to the Americas, which provided the sustenance necessary for survival. Agriculture takes hold in a portion of the Americas between 1000 to 1200 AD, but spreads further and more extensively by 500 AD.Agriculture in the Americas was much different than in Europe and other countries. In the Americas, crops such as corn, beans, and squash were grown and there were no animals involved. Early fifteenth century, Europe was a patchwork of small kingdoms and principalities, and Europe began to expand Into Muslim country and acquired a desire to trade goods with Asia, so they went about exploration of other than previous forms and ended up In America, without knowing It.Soon aft er Columbus arrived, Spanish explorers took an interest and also began to Lonnie, and proceeded to slaughter large numbers of Indians in get rich quick attempt. Also missionaries took an interest in converting the Indians to Christianity, which resulted in blended versions of Catholicism that exist today. Conquistadors, Spanish colonists under a man named Cortez, conquered the Aztec and began Indian labor system. Because of the scarcity of laborers in the Americas, Portuguese and Spanish colonists looked to Africa for black slaves.Spanish colonization and exploitation of Indians resulted in the Pueblo revolt against the Spanish. Europe soon followed their explorer Columbus to the Americas, bringing diseases and sickly pigs, this event Is now called the Great Dying. The Indians began to resist the power of the Spanish and soon coexisted with them, adopting their cultures and learning the Spanish language. Coming to America: Portrait of Colonial Life The New World, the Americas, becam e a magnet for all ethnic groups. People had such a desire to go to the Americas that they would indenture themselves so that they could pay for their passage to the Americas.Voyages to the New World were ungenerous and many died on the voyage, while the youngest and healthiest were sold on shipboard. In New England, family relationships were of a great deal of importance. A marriage ceremony was created by the Puritans who also established obligations that were to be fulfilled by the male and female In each relationship. Divorce also became a right If a spouse broke the rules. The head of the house was to have moral order and correctional order and emotional stability. Men were expected to work in the fields and women joined them during harvest time, but made soaps,

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Turkey-External State Military Threats Essay Example for Free

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Turkey, having the cleanest water resources in the area would surely catch the interest of its neighoring countries that are unfortunate to have a good source of water, where climate change would surely mean water shortages for them. Internal problems could arise within these countries, as well as possible instances of domestic attacks in Turkey. It is due to the fact that lack of water could further result to shortages in food supply, and could lead to a collapse in the economy as well.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Another problem that Turkey is facing is regarding the threats being made on the secular republic. The Turkish armed forces said that there are efforts made to undermine the secular republic, as it was showered by comments regarding issues that the Parliament would elect an Islamic candidate for presidency (Reuters). With this report, people saw what could be a possible threat to secularism. The military however, stood firm that they wouldn’t just be spectators, especially now that secularism is being threatened. However, there were speculations that these comments were just caused by the air of elections coming soon.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   But the problem is that everyday, different ways of undoing the modern advances and destroy the democratic and secular structure of Turkey are coming out. This is according to the chief of the general staff, General Yasar Buyukanit, as he addressed the public during Victory Day last August 30. The secular republic of Turkey is being guarded by no other that its military, as anything they see unusual and threatening to the secular republic will be deposed, the latest of which is in 1997, when the government was viewed to be on the Islamist’s end (Tribune).   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   According to General Buyukanit, the Turkish armed forces will never bend its beliefs and stance and will continue to uphold the interest of the democratic people, of the secular Turkey. The military and higher secular elites have directly opposed the presidential candidacy of Abdullah Gul, which is the Foreign Minister today. The reason for this is because of his Islamic roots, as well as the wearing of a Muslim head scarf by his wife, which is a clear representation of the religion they support.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Turkey is aspiring for membership in the European Union, and is composed of a majority of Muslims, but the constitution it upholds is a strict sense of Secular constitution (Thomas).   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Another military problem that Turkey is suffering from is the Turkish rebel troops’ threat to the country. The rebel group PKK composed of Turkish Kurds are the ones causing the ruckus, launching attacks on the country while in hiding in another county. They are hiding somewhere in the mountainous northern Iraq which is known to be as a Kurdish area. These PKK have ensued deadly attacks on military installations and some public areas of the country (The Boston Globe). The country has formed an incursion in order to punish these rebel troops. However, this incursion would be causing a lot commotion especially because it will pass through the northern Iraq area, something that could possibly go wrong and lead to violence. In order to avoid further harm to any of the two countries, Iraq should be the one to hunt down   these PKK rebels, especially now that they are into hiding in their territory.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Also, Turkey cannot barge into another land only with a massive amount of military troops unless they are declaring war. A of problems could go wrong, and the peaceful area of Northern Iraq could turn into a warzone in an instant. The army massing up by the border in northern Iraq is 150,000-strong just to curb the terroristic ways of these PKK rebels. 150,000 armed soldiers is enough to wage a small war with another country. Turkish Generals however, clarify that they wouldn’t go into hasty measures because they abide by the democratic rules. They said that their will be no cross-border campaign if the Parliament tells them to do so. With this words, the pressure is placed in the shoulders of the Prime Minister Recep Tayyip Erdogan. Previously, Erdogan’s Justice and Development Party is being questioned by the nationalists and secularists for a case of incompetence in the part of the Prime Minister.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   According to the Secretary of State Condoleezza Rice and Defense Secretary Robert Gates, there should be no border crossing to avoid any complications. No one should cross the border from both sides, especially with issues like these heating up. Iraqi Kurds will have to take down the PKK rebels by themselves, even though it may seem hard to do, without the help from Turkey. This is to maintain peace in that northern region of Iraq.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Another problem that Turkey focuses on is about its entry to the European Union. Turkey is making an impression that they deserve to accepted in the EU by avoiding anything that could forfeit a possible European Union membership. However, there are a lot of people, individuals and groups of people who doesn’t agree with the possible membership of Turkey. They see Turkey’s entry in the international group as a problem, instead of being an asset, Turkey becomes a liability. According to these people, Turkey is very different from the other members of the European Union because of how the country is ruled. It is not actually run by democracy, instead, the authority that decides on how it should be ruled are the military forces. A lot of issues spurn out of nowhere regarding Turkey’s membership, like how it deals with minorities’ rights, eradicating the power of the military to run the state, and by improving further the democratic procedures it employs to the populace.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   If ever Turkey will be able to address these issues, then the possibility of getting the favour of most of the EU members is high. However, the problem will be how they will be able to address these issues. Turkey’s rules and policies have been the same for a long time already, and they were able to establish a stable government. If they would abruptly change it in order to qualify for the European Union, nobody knows how it will affect the country. Surely, several complications would arise and the ones that are more likely to suffer are the masses, the Turkish people which these rules are being employed upon. The result would depend on how they will tolerate these changes.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   There problems regarding the European Union membership can be traced with the issue on PKK rebel terrorists. Turkey’s Kurdish region has experienced an increase in violence and has resulted to civilian action. Because of this, the government mobilized Turkish police to pacify the situation, attacking the demonstrating masses with tear gas, batons, tanks and other lethal weapons that can get hold of. The government issued a state of emergency, and a number of human rights and political activists were arrested (Radio Free Europe Radio Liberty). This internal problem that Turkey wasn’t able to address had caught the eye of the leaders of the European Union. They questioned the actions made by Turkish officials, and asked why everything has led to a stir up of the masses. It is a bad image for a member of the European Union to have unsettled government issues like this one, and no member of the EU has experienced problems such as these starting the day they joined the European Union. This has somewhat brought a negative point on Turkey in the aspect of joining the European Union. Efforts have been made to redeem what has happened that time. How can I reduce the threat to human security?   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚     Turkey is facing serious political and military problems these days. This is due to the pressure they are receiving with regards to their aspiration to join the European Union. One of the negative setbacks of this situation is the threat to human security. War can break out anytime, especially now that Turkey and the neighboring countries are well-armed since the region has been plagued by a lot of wars these past few years now. The country’s army may be prepared for war, but the people are not. Surely their lives will be affected if the situation would turn into bombings and gun battles.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   The government is doing their best on how to solve these problems, even though there are times that they are neglecting the side of the people. They may have been overlooking the interest of the people in order for them to be accepted in the European Union. This is a major concern because it involves the welfare of the people, and the main purpose of a governing body of the country is to serve the people. There are other alternatives to these cases however. One of these alternatives is for the people to act. As a citizen, they can do something is they really want to. They can invoke change, depending on how the people do it. They are the ones who has control over these matter, not the rebellious groups, not the military forces, not even the government. Everything is on the people’s hands, and the outcome will surely depend on how they would address the situation. It is no merely a national or a regional problem; it is already a global issue.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   As a citizen, the least I can do is to disseminate information. Having a good line of communication for the whole nation is very crucial, since it opens up the connection for every concerned citizen. People have ideas which can be executed to promote safety and the welfare of other people. It mustn’t fall on deaf ears, especially at times like these, where every idea for a solution counts. As a citizen, I am also bound to this nation by law that’s why I should still abide in every law and regulation it employs on the people. I am also responsible for my actions, such that it wouldn’t lead into further complications for me and my country.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   I should cooperate to the fullest in order for the programs and projects of the government to be successful. It is also crucial to choose on what side am I on, regarding the issue of the Europen Union. If the leaders deem that being a member is what truly matters, then I must abide by their ideas. However, I am also responsible to voice out my opinions in a more peaceful way than staging demonstration and ensuing public mobility. It could really be a waste of time and resources, instead of focusing on what really needs to be focused on – the actual problems that the country has.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Even though I am just an individual, there are still other ways on how I can be of use to the country. I should try my best to become an asset instead of being a liability. Instead of complaining about how things work and how things go, I should just be cooperative with the programs that they employ to the people. There is always a right time to complain, which is also my responsibility as a citizen. I should report everything that I see as wrong, so that people concerned would still be able to amend or fix it. Works Cited: Ankara. Militarys Expert Says Israel, Iraq and Syria Can Become Threats.   2007.   Turkish Daily News. September 19 2007. http://www.turkishdailynews.com.tr/article.php?enewsid=83719. Radio Free Europe Radio Liberty. Iraq: Kurdish Official Downplays Threat from Turkey.   2006.   Radio Free Europe Radio Liberty. September 19 2007. http://www.rferl.org/featuresarticle/2006/07/c2c5fa27-919a-4eaa-a4e1-f05445e35fe6.html. Reuters. Secular Turkey Is under Threat, Military Says.   Europe, 2007.   International Herald Tribune. September 19 2007. http://www.iht.com/articles/2007/08/27/europe/turks.php. The Boston Globe. Turkish Threats to Turkey.   2007. September 19 2007. http://www.boston.com/news/globe/editorial_opinion/editorials/articles/2007/06/15/turkish_threats_to_turkey/. Thomas, Mark. Mark Thomas Refuses to Ignore the Problem of Turkey.   2006. September 19 2007. http://www.newstatesman.com/200604240014. Tribune, The World. Turkeys Secular Government in Trouble, General Warns.   2006.   East West Services. September 19 2007. http://www.worldtribune.com/worldtribune/06/front2454005.08125.html.

Qualitative Analysis Of An Overhead Throw Physical Education Essay

Qualitative Analysis Of An Overhead Throw Physical Education Essay Overhead throw is an important fundamental movement in many sports. It is categorized to be one of the early fundamental manipulative motor skills for every child to develop (Kathleen, 2004). This skill can be transferred to many other sports such as tennis serve, javelin throw and baseball pitching. The throw can be assessed either for accuracy (e.g. baseball pitching) or for distance (e.g. javelin throw) and there are some critical features that need to be present in the throw in order to achieve an optimum throw. In this study the goal is to achieve maximum distance and hence it is important to consider the law governing projectile motion which is angle of release, height of release and velocity of release. In qualitative studies, we use critical features or elements to cue the presence of these 3 features. The presence of upward ball path, the fully extended elbow in the throwing hand and the accelerated overhead arm swing are some of the actions to cue presence. Critical features or elements are based on biomechanical factors that create the throw movement and are usually derived from quantitative analysis studies of throwers. One such factor is kinetic open chained movement where body segments or joints move in a combination. The movement involves chaining segmental movements such that the last segment is free to move E.g. in a kicking ball action, the hip flexes with the knee extends and dorsi-flexes during the kicking action and the relax arm action during an overhead throw. Another biomechanical factor is the concept of kinetic-link and stretch shorten cycle where there is an interaction of a linked system of body segments. (Kreighbaum and Barthels, 1985; Steindler, 1955). Each segment need to move in a sequential coordinated manner with precise timings of acceleration of proximal segment so as to transfer energy to distal segment. In qualitative studies, physical education teacher and coaches observe these critical features for quick assessment on the overhead throw or other activity. Qualitative analysis is much preferred than quantitative analysis as it is not feasible and practical for physical education teachers and coaches to adopt quantitative analysis. There are many issues concerning using quantitative analysis such as time, cost, practicality and even ethical. Some parent may not be comfortable with their child being taken into lab for collection of data. One major advantage of qualitative analysis is that it allows skill to be assessed as a whole as the proficiency of some movement may be involving the interaction of every critical feature. In motor development milestone studies, qualitative studies take the approach of observing the critical features and analyze it with the motor skills developmental milestones. Getchell, 2005, motor development experts formulate logical decision tree checklist to a ssess the maturity of the critical features. Another method is to compare the performer with and expert, this allows the skill gap to be more visible. Intervention can later been drafted effectively to improve performance by emulating the technique of the expert. Objectives The objective of this study is to show the use of qualitative analysis in improving a child (subject age 6) overarm throw. The throw will be maximal effort, thrown for distance. The comparison model will be of an adult expert thrower (subject age 30). Intervention will be suggested based on the qualitative analysis to improve throwing technique. Methodology This study adopted Knudson Morrisons four-task integrated qualitative analysis model of preparation, observation, evaluation/diagnosis and intervention. Prior to the activity, an observational check list (Fig 2) was drafted using Gangstead and Beveridge, 1984, D. Knudson C. Morrison, 1996 and Haywood Getchell, 2005 model of an overhead throw. In this check sheet, the overarm throw was broken up into 3 phases which are preparation, action and follow through phases. Critical features for each phase were listed to assist in the observation and evaluation of the throw. An adult expert thrower was used for comparing the childs throw. Each component and phases were evaluated objectively with a score of poor, average and good. The adult and the child performer was tasked to do overarm throws (n=3) with maximal effort and distance of each throw was recorded using a standard 50m measuring tape. Maximal effort throw was chosen as the type of activity rather than throw for accuracy as the latter may be a difficult skilled task for the child. These eliminate the concern for motor developmental stage of the child. Children sponge tennis balls were used as projectile. Due to the experience level and language limitation of the child, he was given verbal instructions and a demonstration of the activity. The adult and child thrower performed the throws at two different locations due to childs parents consents. Video of each throw was recorded using a Sony digital camcorder model: Model: DSR-PDS10P using a 2-dimensional analysis camera setup. The video data was analyzed qualitatively using the checksheet and the software use is a standard computer integrated media player, window media player. Results Fig 1: Sequential phases of expert and child throw Child achieved an average of 8.58m as compared to the expert thrower with 20.5m (Fig 3). From Fig 1 2, sequential phases and observational checklist, the child showed a different movement pattern from the expert and score poorly in terms of path of hub, bodyweight transfer and movement of the legs and trunk during the preparation, action and follows through phase. There is an absence of trunk utilization throughout the 3 phases. During the preparation and action phases, the child exhibited a poor homolateral lower body action where he bent his knee of the same side as the throwing hand. In addition, there were no bodyweight transfer and leg drive by the child in the preparatory and action phases. On the other hand, the child showed similar upper body movement pattern in the action and follow through phase. There was an arm and humerus lag during the action phase. There was acceleration of his throwing arm in forward direction. The ball was released in an incline with his arm fully extended at the top of his head. The whole movement was accelerated, smooth and continuous. During the follow through phase, his arms swung across the body and relax. The child scored well in critical features of arm actions and the release of ball. As a whole, he show competency in the action phases with an average score and scored well in the follow through phase with a good score. Fig 3: Throw Distances Fig 2: Observational Checklist Intervention The child has good upper body technique and if the child is able to throw consistently with this technique. Improvements could be made in leg drive, contral lateral leg action, sequential coordination, and angle of release. Practice should consist of a combination of games approach (GCA) and drills bearing in mind his age and motivational level. The whole throwing sequence can be broken down into parts to simplify learning. One example practice to improve leg drive and contral lateral leg action is by putting visual cues like colour spots or numbering spot for them to step on. Next, improvement of the angle of release can be taught by putting target on the wall and the child needs to throw toward the target. Different target height can be put so as to allow the child to explore and experience different angle of release. The presence of targets allows the child to direct his attention to the effects to the ball trajectory (external focus of attention) rather than directing their atten tion to their arm throwing form (internal focus of attention) hence making learning more effective (Wulf Prinz, 2001). Sequential coordination should be the last to be taught as for many high-speed movements, it is the last refinement area for optimal performance. It said that development of sequential action will be limited until energy from the lower extremity can be channeled up to the body (Morrison Knudson, 2002). Before introducing the intervention, there should be some consideration in terms of his age and developmental milestones. There is a need to individualize the teaching and feedback hence his training should not be mixed with other children unless being group with similar profile. This is because children of the same chronological age may differ in developmental level and physiological age (Getchell, 2005). Models of good throw as a whole or segments need to be shown with good critical cues used during practice, research show that this can improves performance and learning best in children (Fronske, 1995; Masser, 1993; Weiss, 1982). Appropriate augmented feedback need to be given by identifying both strength and weakness with strength to be praised before reinforcement. According to Throndikes law, 1927, people tend to repeat responses that are rewarded and avoid responses that are punished. Evaluation, diagnosis and re-observation need to be done regularly to monitor progression. In addition, record keeping of the whole movement and critical features progression through observation check sheet provide reference to coaches and teacher on the progression of learning. Video recordings or pictures can be also be adopted to provide visual feedback to the child. This allows reflective learning which further enhances learning. Discussion From this study, we can clearly see the practicality and the feasibility of qualitative studies in an activity. It is a low cost and quick way of skill and technique improvement process. As teachers and coaches, the use of video and checksheet can help to record and observe large number of students at the same time. The video data can then be viewed at a convenient time. With the current technology, the video can be played in slow motion where critical features can be objectively assessed. In the event of shortage of manpower, the use of observational checksheet allows the coaches and teachers to share the evaluation workload with other teachers or senior students without compromising the objectivity and validity of the evaluation. In addition, the videos and observational checksheet allow record keeping of subject performance for future development and studies. Exemplary skills can be shared and showed to future students and trainee for modeling purposes. The possible challenge to the use of qualitative analysis is the perception its effectiveness. Teacher and coaches may perceive qualitative assessment may not be very objective as it is not absolute. When it comes to grading or selection exercise, the subject of fairness is questionable. There will be some resistance to the use of video analysis as some may find it difficult to use. To tackle these two issues, qualitative analysis can be made more objective and assessment friendly by having more details description in the observational checklist. As for the difficulty in using video, more training can be given to teacher and coaches. They can also be attached a mentor to assist. The proficiency will eventually be improved with more practice.

Efficient Markets Hypothesis (EMH)

Efficient Markets Hypothesis (EMH) INTRODUCTION: Much of modern investment theory and practice is predicated on the Efficient Markets Hypothesis (EMH), the assumption that markets fully and instantaneously integrate all available information into market prices. Underlying this comprehensive idea is the assumption that the market participants are perfectly rational, and always act in self-interest, making optimal decisions. These assumptions have been challenged. It is difficult to tip over the Neo classical convention that has yielded such insights as portfolio optimization, the â€Å"Capital Asset Pricing Model†, the â€Å"Arbitrage Pricing Theory†, the â€Å"Cox Ingersoll-Ross theory† of the term structure of interest rates, and the â€Å"Black-S[choles/Merton option pricing model†, all of which are predicated on the EMH (Efficient Market Hypothesis) in one way or another. At few points the EMH criticizes the existing literature of behavioral finance, which shows the difference of opinion on psychology economics. The field of psychology has its roots in empirical observation, controlled experimentation, and clinical applications. According to psychology, behavior is the main entity of study, and only after controlled experimental dimensions do psychologists attempt to make inferences about the origins of such behavior. On the contrary, economists typically derive behavior axiomatically from simple principles such as expected utility maximization, making it easier for us to predict economic behavior that are routinely refuted empirically The biggest threats to Modern Portfolio theory is the theory of Behavioral Finance. It is an analysis of why investors make irrational decisions with respect to their money, normal distribution of expected returns generally appears to be invalid and also that the investors support upside risks rather than downside risks. The theory of Behavioral finance is opposite to the traditional theory of Finance which deals with human emotions, sentiments, conditions, biases on collective as well as individual basis. Behavior finance theory is helpful in explaining the past practices of investors and also to determine the future of investors. Behavioral finance is a concept of finance which deals with finances incorporating findings from psychology sociology. It is reviewed that behavioral finance is generally based on individual behavior or on the implication for financial market outcomes. There are many models explaining behavioral finance that explains investors behavior or market irregularities where the rational models fail to provide adequate information. We do not expect such a research to provide a method to make lots of money from the inefficient financial market very fast. Behavioral finance has basically emerged from the theories of psychology, sociology and anthropology the implications of these theories appear to be significant for the efficient market hypothesis, that is based on the positive notion that people behave rationally, maximize their utility and are able to prices observation, a number of anomalies (irregularities) have appeared, which in turn suggest that in the efficient market the principle of rational behavior is not always correct. So, the idea of analyzing other model of human behavior has came up. Further (Gervais, 2001) explained the concept where he says that People like to relate to the stock market as a person having different moods, it can be bad-tempered or high-spirited, it can overreact one day and make amends the next. As we know that human behavior is unpredictable and it behaves differently in different situations. Lately many researchers have suggested the idea that psychological analysis of investors may be very helpful in understanding the financial markets better. To do so it is important to understand the behavioral finance presenting the concept that Investors are not as rational as traditional theory has assumed, and biases in their decision-making can have a cumulative effect on asset prices. To many researchers behavioral finance is a revolution, transforming how people see the markets and what influences prices. The paradigm is shifting. People are continuing to walk across the border from the traditional to the behavioral camp†. (Gervais, 2001, P.2) . On the contrary some people believe that may be its too early call it a revolution. Eugene Fama( Gervais, 2001) argued that Behavioral finance has not really shown impacts on the world prices, and the models contradict each other on different point of times. He gave little credit to behaviorist explanations of trends and anomalies(any occurrence or object that is strange, unusual, or unique) arguing that data-mining techniques make it possible to locate patterns. Other researchers have also criticized the idea that the behavioral finance models tend to replace the traditional models of market functions. The weaknesses in this area, explained by him (Gervais, 2001) are that generally the market behavior displayed is attributed to overreaction and sometimes to under reaction. Where People take the behavior that seems to be easy for the particular study regardless of the fact that whether these biases are the result of underlying economic forces or not. Secondly, Lack of trained and expert people. The field does not have enough trained professionals both academic psychology and traditional finance and so the models that are being put up together are improvised. David Hirshleifer (Gervais, 2001) focuses on the individual behavior influencing asset prices, suggesting that behavioral finance is in its developmental stage and not yet a mature one, theres a lot of disagreement but productive one. Hirshleifer agrees that applying behavioral-finance concepts to corporate finance can pay off. If managers are imperfectly rational, he says, perhaps they are not evaluating investments correctly. They may make bad choices in their capital-structure decisions. Few people realistically think behavioral finance will displace efficient-markets theory. On the other hand, the idea that investors and managers are not uniformly rational makes insightful sense to many people. Traditional Finance Empirical Evidence: â€Å"Traditional theory assumes that agents are rational the law of one price holds† that is a perfect scenario. Where the law of â€Å"One price† states that securities with the same pay off have same price, but in real world this law is violated when people purchase securities in one market for immediate resale in another, in search of higher profits because of price differentials known as â€Å"Arbitrageurs†. And the agents rationality explains the behavior of investor â€Å"Professional Individual† which is generally inconsistent with the rationality or the future predictions. If a market achieves a perfect scenario where agents are rational law of one price holds then the market is efficient. With the availability of amount of information, the form of market changes. It is unlikely that market prices contain all private information. The presence of â€Å"noise traders† (traders, trading randomly not based on information). Researches show that stock returns are typically unpredictable based on past returns where as future returns are predictable to some extent. Few examples from the past literature explains the problem of irrationality which occurs because of naà ¯ve diversification, behavior influenced by framing, the tendency of investors of committing systematic errors while evaluating public information.(Glaser et al, 2003) Recent studies suggest that peoples` attitude towards the riskiness of a stock in future the individual interpretation may explain the higher level trading volume, which itself is a vast topic for insight. A problem of perception exist in the investors that Stocks have a higher risk adjusted returns than bonds. Another issue with the investors is that these investors either care about the whole stock portfolio or just about the value of each single security in their portfolio and thus ignore the correlations. The concept of ownership society has been promoted in the recent years where people can take better care of their own lives and be better citizen too if they are both owner of financial assets and homeowners. As a researcher suggested that in order to improve the lives of less advantaged in our society is to teach them how to be capitalist, In order to put the ownership society in its right perspective, behavioral finance is needed to be understood. The ownership society seems very attractive when people appear to make profits from their investments. Behavioral finance also is very helpful in understanding justifying government involvement in the investing decisions of individuals. The failure of millions of people to save properly for their future is also a core problem of behavioral finance. (Shiller, 2006) According to (Glaser et al, 2003) there are two approaches towards Behavioral Finance, where both tend to have same goals. The goals tend to explain observed prices, Market trading Volume Last but not the least is the individual behavior better than traditional finance models. Belief Based Model: Psychology (Individual Behavior) Incorporates into Model Market prices Transaction Volume. It includes findings such as Overconfidence, Biased Self- Attrition, and Conservatism Representativeness. Preference Based Model: Rational Friction or from psychology Find explanations, Market detects irregularities individual behavior. It incorporates Prospect Theory, House money effect other forms of mental accounting. Behavioral Finance and Rational debate: The article by (Heaton and Rosenberg,2004) highlights the debate between the rational and behavioral model over testability and predictive success. And we find that neither of them actually offers either of these measures of success. The rational approach uses a particular type of rationalization methodology; which goes on to form the basis of behavior finance predictions. A closer look into the rational finance model goes on to show that it employs ex post rationalizations of observed price behaviours. This allows them greater flexibility when offering explanations for economic anomalies. On the other hand the behavior paradigm criticizes rationalizations as having no concrete role in predicting prices accurately, that utility functions, information sets and transaction costs cannot be ‘rationalized. Ironically they also reject the rational finances explanatory power which plays an essential role in the limits of arbitrage, which actually makes behavioral finance possible. Milton Friedmans theory lays the basis of positive economics. His methodology focuses on how to make a particular prediction; it is irrelevant whether a particular assumption is rational or irrational. According to this methodology, the rational finance model relies on a limited â€Å"assumption space since all assumptions that are supposedly not rational have been eliminated. This is one of the major reasons behind the little success in rational finance predictions. Despite the minimal results, adherents of this model have criticized the behavioral model as lacking quantifiable predictions that are based on mathematical models. Rational finance has targeted a more important aspect in the structure of the economy, i.e. investor uncertainty, which further cause financial anomalies. In explaining these assertions, the behavioural emphasises the importance of taking limits in arbitrage. Friedmans methodological approach falls into the category ‘instrumentalism, which basically states that theories are tools for predictions and used to draw inferences. Whether an assumption is realistic or rational is of no value to an instrumentalist. By narrowing what may or may not be possible, one will inevitably eliminate certain strategies or behaviors which might in fact go on to maximize utility or profits based on their uniqueness. An assumption could be irrational even in the long run, but it is continuously revised and refined to make it into something useful. In opposition to this, many individuals have gone on to say that behaviouralists are not bound by any constraints thus making their explanations systematically irrational. Rubinstein (2001) described how when everyone fails to explain a particular anomaly, suddenly a behavioral aspect to it will come up, because that can be based on completely abstract irrational assumptions. To support rationality, Rubinstein came up with two arguments. Firstly he went on to say that an irrational strategy that is profitable, will only attract copy cat firms or traders into the market. This is supported when a closer look is given towards limits to arbitrage. Secondly through the process of evolution, irrational decisions will eventually be eliminated in the long run. The major achievements characterized of the rational finance paradigm consist of the following: the principle of no arbitrage; market efficiency, the net present value decision rule, derivatives valuation techniques; Markowitzs (1952) mean-variance framework; event studies; multifactor models such as the APT, ICAPM, and the Consumption- CAPM. Despite the number of top achievements that supporters of the rational model claim, the paradigm fails to answer some of the most basic financial economic questions such as ‘What is the cost of capital for this firm? or ‘What is its optimal capital structure?; simply because of their self imposed constraints. So far this makes it seem like rational finance and behavioral finance are mutually exclusive. Contrary to this, they are actually interdependent, and overlap in several areas. Take for instance the concept of mispricing when there is no arbitrage. Behavior finance on the other hand suggests that this may not be the case; irrational assumptions in the market will still lead to mispricing. Further even though certain arbitrageurs may be able to identify irrationality induced mispricing, because of the imperfect market information, they are unable to convince investors of its existence. Over here, the rational model is accepting the existence of anomalies which are affected both through the factors of risk and chance; therefore coinciding with the perspective of behavioral finance. Two instances are clear examples of how rationalization is an important limit of arbitrage: i) the build-up and blow-up of the internet bubble; and ii) the superiority of value equity strategies. If we focus on the latter, we are able to see behavioral finance literature that highlights the superiority of such strategies in the ability of analysts to extrapolate results for investors. This is possible when rationalization is taken as a limit to arbitrage. Similarly these strategies may also limit arbitrage against mispricing, through the great risk associated with stocks. In explaining most anomalies it is essential that analysts first conclude whether pricing is rational or not. To prove their hypothesis that irrationality-induced mispricing exists, behaviouralists may find it easier if they accepted the role of rationalization in limits of arbitrage. Slow information diffusion and short-sales constraints are other factors that explain mispricing. However these factors alone cannot form the basis of a strong and concrete explanation that will clarify pricing across firms and also across time. Those supporting the rational paradigm attack behavioral finance adherents in that their predictions for the financial market have been made on irrational assumptions; that are not supported by concrete mathematical or scientific models. In their view the lack of concrete discipline in the methodology adopted in behavior finance leads to the lack of testing in their forecasts. On the other hand the rational model is criticized for its lack of success in financial predictions. The behaviouralists claim that this limitation exists because the supporters of rational finance dismiss aspects of the economic market simply because it may not fall into explainable rational behavior. Both perspectives claim to align themselves with respect to the goals of ‘testability and ‘predictions, while at the same time continue to offer evidence against the other model. In reality however, rather than being exclusively mutual both paradigms assist one another in making their predictions. BODY: A cognitive bias is a persons tendency to make errors, based on cognitive factors. Forms of cognitive bias include errors in statistical judgment, social attribution, and memory that are common to all human beings. (Crowell, 1994, p. 1) â€Å"Cognitive bias is the tendency of intelligent, well-informed people to consistently do the wrong thing†. The reason behind this cognitive bias is that the Human brain is made for interpersonal relationships and not for processing statistics. The paper discusses facility of forecasts. Generally it is said that the world is divided into two groups. One who forecasts positively and one negatively. These forecasts exaggerate the reliability of their forecasts and trace it to the â€Å"illusion of validity† which exists even when the illusionary character is recognized. (Fisher and Statman, 2000) discussed five cognitive bias, underlying the illusion of validity that are Overconfidence, Confirmation, Representativeness, Anchoring, and Hindsight (Shiller, 2002) discusses, that irrational behavior may disappear with more learning and a much more structured situation. As the past research proves it that may of cognitive biases in human judgment value uncertainty will change, they may be convinced if given proper instructions, on the part-experience of irrational behavior. There are three main themes in behavioral finance and economics Heuristics: People often make decisions based on approximate rules of thumb, not strictly rational analysis. See also cognitive biases and bounded rationality. Prospect theory Loss aversion Status quo bias Gamblers fallacy Self-serving bias Money illusion Framing: The way a problem or decision is presented to the decision maker will affect their action. Cognitive framing Mental accounting Anchoring Market inefficiencies: There are explanations for observed market outcomes that are contrary to rational expectations and market efficiency. These include mis-pricings, non-rational decision making, and return anomalies. Richard Thaler, in particular, has described specific market anomalies from a behavioral perspective. Anomalies (economic behavior) Disposition effect Endowment effect Inequity aversion Intertemporal consumption Present-biased preferences Momentum investing Greed and fear Herd behavior Anomalies (market prices and returns) Equity premium puzzle Efficiency wage hypothesis Limits to arbitrage Dividend puzzle Models in behavioral economics are typically addressed to a particular observed market anomaly and adjust standard neo-classical models by describing decision makers as using heuristics and being affected by framing effects. In general, economics sits within the neoclassical framework, though the standard assumption of rational behavior is often challenged. Loix et. Al in their paper â€Å"Orientation towards Finances† explains the individual financial management behavior, people dealing with their financial means. They have analyzed the Non-specific Financial behavior as already we see extensive research on the specific finance behavior such as saving, Taxation, Gambling, amassing debt. But they had given a lot of importance to stock market, investors and households. The analysis of general public`s behavior was done, where an ordinary man is not sure and simply act according to the guesses over their money related issues. It was also found that people interested in economic and financial matters are much more active in collecting specific information than general public, stating that financial behavior of household is an important relevant topic that needs to be discussed in much more details. Household financial management is similar to the financial management. The construct of orientation towards finances was developed where the individual ORTO FIN focuses on competencies (interest and skills). Having stronger money attitude is an indication of stronger orientation towards finances and much more effective competencies. Therefore we expect some relevance and similarity between corporate and household management behavior as both require organizing, forecasting, planning and control. (Loix et. al, 2005) analyzed general publics behavior in basically dividing them into two groups, Financial Information Personal financial planning. Also explaining some practical and theoretical gaps in the area of psychology of money usage, they concluded that ORTOFIN (Orientation towards finance) indicates the involvement of individuals in managing their finances. Proving out the point that active interest in financial information and an urge to plan expenses are two main factors. A stronger ORTFIN indicates: Greater use of debit accounts, Higher savings account, Wide variety of investments, Greater awareness of ones financial Intimate knowledge of the details of Ones savings/deposit accounts obsessed by money, Higher achievement and power in monetary terms, Further age is also inversely proportional. Shiller in 2006, in his article talked about the the co-evolution of neo-classical and behavior finance. In 1937 when A. Samuelsson one of the great economists wrote about people maximizing the present value of utility subject to a present vale budget constraint. Another judgment he realized was time being consistent human behavior where if at any time t 0 Where people reconsidered the problem of maximization from that date forward, they would not change their decision where as in real life it is totally opposite for example people sometimes try to control themselves by binding their future decision as from history we find out that that some of man make irrevocable trust in the taking out of life insurance as a compulsory savings measure. (shiller, 2006, p.) Considering personal saving rate, saving and down for no reason has emerged as a weakness of human self control. People seem to be vulnerable to complacency from time to time about providing for their own future. The distinction between neoclassical and behavioral finance have therefore been exaggerated. Both of them are not completely different from each other. Behavioral finance is more elastic willing to learn from other sciences and less concerned about the elegance of models whereby explaining human behavior Investing and cognitive bias: Money Managers Money management is a very popular phenomenon. The performance in the stock market is measured at the daily basis and not to wait for a highly subjective annual review of ones performance by ones superior. Market grades you on a daily basis. The smarter one is, the more confident one becomes of ones ability to succeed, clients support them by trusting them that eventually helps their careers. But the truth is that few money managers put in sufficient amount of time and effort to figure out what works and develop a set of investment principles to guide their investment decisions (Browne, 2000). Further Browne discussed the importance of asset allocation and risk aversion, in order to understand why we do what we do regardless of whether it is rational or not. General public opts for money Managers to deal with their finances and these managers are categorized in three ways: Value Managers, Growth Managers and Market Neutral Managers. The vast majority of money managers are categorized as either value managers or growth managers although a third category, market neutral managers, is gaining popularity these days and may soon rival the so-called strategies of value and growth. Some investment management firms even are being cautious by offering all styles of investments. What too few money managers do is analyze the fundamental financial characteristics of portfolios that produce long-term market beating results, and develop a set of investment principles that are based on those findings. Difference of opinion on the definition of Value is the problem.The reasons for this are two-fold, one being the practical reality of managing large sums of money, and the other related to behavior. As the assets under management of an advisor grow, the universe of potential stocks shrinks Analyzing that why individual and professional investors do not change their behavior even when they face empirical evidence, that suggests that their decisions are less than optimal. An answer to this question is said to be that being a contrarian may simply be too risky for the average individual or professional. If a person is wrong on the collective basis, where everyone else also had made a mistake, the consequences professionally and for ones own self-esteem are far less than if a person is wrong alone. The herd instinct allows for the comfort of safety in numbers. The other reason is that individuals try to behave the same way and do not tend to change courses of action if they are happy. If the results are not too painful individuals can be happy with sub-optimal results. Moreover, individuals who tend to be unhappy make changes often and eventually end up being just as unhappy in their new circumstances. According to the traditional view of Investment management, fundamental forces drive markets, however many other investment firms considers to be active and working out based on their experienced Judgment. It is also believed that Judgmental overrides of Value Fundamental forces of markets can be lethal as well as a cause of Financial Disappointment. From the history it has been found that people Override at the wrong times and in most cases would be better off sticking to their investment disciplines (Crowell, 1994) and the reason to this behavior is the Cognitive bias. According to many researchers, stocks of small companies with low price/book ratios provide excess returns. Therefore, given a choice among small cheap stocks large high priced stocks, prominent investors (financial analysts, senior company executives and company directors) will certainly prefer the small cheap ones. But the fact is opposite to this situation where these prominent investors would opt for large high priced ones and so suffer from cognitive bias and further regret. According to a survey in 1992/1993, a research was carried out that included senior executives directors where they were suppose to rate companies in their industries on eight factors: Quality of management, Quality of products services, Innovativeness, Long term investment value, Financial soundness, Ability to attract, develop and keep talented people, Responsibility to the community and environment, Wise use of corporate assets. The assumptions that we made were that that â€Å"Long term investment value should be negatively correlated with size since small stocks provide superior returns. Long term Investment value should have a negative correlation with Price/book since low Price/Book stocks provide superior returns†.(Crowell, 1994). Whereas the results of the survey were contrary that stated that Long Term Investment had a positive correlation with the size and also that the Long term investment value had a positive correlation with the Price/Book stocks. According to Shefrin and statman, prominent investors overestimate the probability that a good company is a good stock, relying on the representative heuristics, concluding that superior companies make superior stocks. Aversion to Regret: aversion to regret is different from aversion to risk, Regret is acute when the individual must take responsibility for the final outcome. Aversion to regret leads to a preference for stocks of good companies. The choice of the stocks of bad companies involves more personal responsibility and higher probability of regret. Therefore, we find there are two major Cognitive errors: â€Å"We have a double cognitive error: a Good company make good stocks (representativeness), and involves less responsibility(Less aversion to regret† (Crowell, 1994,p.3) The Anti Cognitive bias actions would be admitting to your owned stocks, admitting earlier investment mistakes. Further Taking the responsibility for the actions to improve their performance in the future. The reasons for all the available disciplines, tools, and quantitative techniques is to deal with the Cognitive bias error, where the quantitative investment techniques enables the investment managers to overcome cognitive bias, follow sound investment, and eventually be successful contrarian investor(one who rejects the majority opinion, as in economic matters). Behavioral finance also is very helpful in understanding justifying government involvement in the investing decisions of individuals. The failure of millions of people to save properly for their future is also a core problem of behavioral finance. With the help of two very important examples Shiller explains how Government involvement can influence financial investments of individuals. In April 2005 â€Å"Tony Blair† stated a program when all new born babies were given a birthday present of 250 to 500. The present were to choose among a number of investment alternatives to invest until child comes of age. This is an effect done in order to make the parents feel connected with investments and modern economy. Another example: as it is said that people should be heavily active in stock market when they are young and so generally should reduce the activity with age. According to the conventional rule people should have 100 Age = % age of investment In 2005 president bush also portfolio announced one such plan for personal account â€Å"life cycle fund† which would be among the option that works will be offered to invest their personal account. It was A centerpiece of the presidents proposal bur a major point to be noticed was the default option. An important aspect of behavioral finance is the human attention is capricious focuses heavily tat same times on financial calculations and are subject to distraction and dissipation of default option is central. All this brings us a question that what should an intertemporal optimizer do to manage his portfolio over the lifetime. According to Samuelson someone who wished to maximize the expected value of his intertemporal utility function by managing the allocation of the portfolio between a high yielding asset and less yielding asset would not actually change the allocation through time. Neoclassic finance appears highly relevant to such a discussion in that it offers the appropriate theoretical framework for considering what people ought to do with the portfolio if not what they actually do. Behavioral is beginning to play an important role in public policy such as in social security reforms. Agents Rationality: Global culture Culture Social Contagion: The selective attention exhibited by a human mind is the concept of culture. Every nation, tribe or asocial group has a social cognition reinforced by conversation ritual and symbols, rituals and supposition of a particular nation has a subtle but far reliability affect on human behavior. Some researchers found that the unique customs of people actually arise as a logical consequence of a belief system of a nation group of people. Cultural factor were found to have great influence on rational or irrational behavior. We find many factors that are same across countries , e.g fashion, music, movies, youthful rebellious, other than these we find more factors in producing internationally- similar human behaviors then just rational reactions. Therefore it is a difficult job to decide in what avenues global culture exerts Efficient Markets Hypothesis (EMH) Efficient Markets Hypothesis (EMH) INTRODUCTION: Much of modern investment theory and practice is predicated on the Efficient Markets Hypothesis (EMH), the assumption that markets fully and instantaneously integrate all available information into market prices. Underlying this comprehensive idea is the assumption that the market participants are perfectly rational, and always act in self-interest, making optimal decisions. These assumptions have been challenged. It is difficult to tip over the Neo classical convention that has yielded such insights as portfolio optimization, the â€Å"Capital Asset Pricing Model†, the â€Å"Arbitrage Pricing Theory†, the â€Å"Cox Ingersoll-Ross theory† of the term structure of interest rates, and the â€Å"Black-S[choles/Merton option pricing model†, all of which are predicated on the EMH (Efficient Market Hypothesis) in one way or another. At few points the EMH criticizes the existing literature of behavioral finance, which shows the difference of opinion on psychology economics. The field of psychology has its roots in empirical observation, controlled experimentation, and clinical applications. According to psychology, behavior is the main entity of study, and only after controlled experimental dimensions do psychologists attempt to make inferences about the origins of such behavior. On the contrary, economists typically derive behavior axiomatically from simple principles such as expected utility maximization, making it easier for us to predict economic behavior that are routinely refuted empirically The biggest threats to Modern Portfolio theory is the theory of Behavioral Finance. It is an analysis of why investors make irrational decisions with respect to their money, normal distribution of expected returns generally appears to be invalid and also that the investors support upside risks rather than downside risks. The theory of Behavioral finance is opposite to the traditional theory of Finance which deals with human emotions, sentiments, conditions, biases on collective as well as individual basis. Behavior finance theory is helpful in explaining the past practices of investors and also to determine the future of investors. Behavioral finance is a concept of finance which deals with finances incorporating findings from psychology sociology. It is reviewed that behavioral finance is generally based on individual behavior or on the implication for financial market outcomes. There are many models explaining behavioral finance that explains investors behavior or market irregularities where the rational models fail to provide adequate information. We do not expect such a research to provide a method to make lots of money from the inefficient financial market very fast. Behavioral finance has basically emerged from the theories of psychology, sociology and anthropology the implications of these theories appear to be significant for the efficient market hypothesis, that is based on the positive notion that people behave rationally, maximize their utility and are able to prices observation, a number of anomalies (irregularities) have appeared, which in turn suggest that in the efficient market the principle of rational behavior is not always correct. So, the idea of analyzing other model of human behavior has came up. Further (Gervais, 2001) explained the concept where he says that People like to relate to the stock market as a person having different moods, it can be bad-tempered or high-spirited, it can overreact one day and make amends the next. As we know that human behavior is unpredictable and it behaves differently in different situations. Lately many researchers have suggested the idea that psychological analysis of investors may be very helpful in understanding the financial markets better. To do so it is important to understand the behavioral finance presenting the concept that Investors are not as rational as traditional theory has assumed, and biases in their decision-making can have a cumulative effect on asset prices. To many researchers behavioral finance is a revolution, transforming how people see the markets and what influences prices. The paradigm is shifting. People are continuing to walk across the border from the traditional to the behavioral camp†. (Gervais, 2001, P.2) . On the contrary some people believe that may be its too early call it a revolution. Eugene Fama( Gervais, 2001) argued that Behavioral finance has not really shown impacts on the world prices, and the models contradict each other on different point of times. He gave little credit to behaviorist explanations of trends and anomalies(any occurrence or object that is strange, unusual, or unique) arguing that data-mining techniques make it possible to locate patterns. Other researchers have also criticized the idea that the behavioral finance models tend to replace the traditional models of market functions. The weaknesses in this area, explained by him (Gervais, 2001) are that generally the market behavior displayed is attributed to overreaction and sometimes to under reaction. Where People take the behavior that seems to be easy for the particular study regardless of the fact that whether these biases are the result of underlying economic forces or not. Secondly, Lack of trained and expert people. The field does not have enough trained professionals both academic psychology and traditional finance and so the models that are being put up together are improvised. David Hirshleifer (Gervais, 2001) focuses on the individual behavior influencing asset prices, suggesting that behavioral finance is in its developmental stage and not yet a mature one, theres a lot of disagreement but productive one. Hirshleifer agrees that applying behavioral-finance concepts to corporate finance can pay off. If managers are imperfectly rational, he says, perhaps they are not evaluating investments correctly. They may make bad choices in their capital-structure decisions. Few people realistically think behavioral finance will displace efficient-markets theory. On the other hand, the idea that investors and managers are not uniformly rational makes insightful sense to many people. Traditional Finance Empirical Evidence: â€Å"Traditional theory assumes that agents are rational the law of one price holds† that is a perfect scenario. Where the law of â€Å"One price† states that securities with the same pay off have same price, but in real world this law is violated when people purchase securities in one market for immediate resale in another, in search of higher profits because of price differentials known as â€Å"Arbitrageurs†. And the agents rationality explains the behavior of investor â€Å"Professional Individual† which is generally inconsistent with the rationality or the future predictions. If a market achieves a perfect scenario where agents are rational law of one price holds then the market is efficient. With the availability of amount of information, the form of market changes. It is unlikely that market prices contain all private information. The presence of â€Å"noise traders† (traders, trading randomly not based on information). Researches show that stock returns are typically unpredictable based on past returns where as future returns are predictable to some extent. Few examples from the past literature explains the problem of irrationality which occurs because of naà ¯ve diversification, behavior influenced by framing, the tendency of investors of committing systematic errors while evaluating public information.(Glaser et al, 2003) Recent studies suggest that peoples` attitude towards the riskiness of a stock in future the individual interpretation may explain the higher level trading volume, which itself is a vast topic for insight. A problem of perception exist in the investors that Stocks have a higher risk adjusted returns than bonds. Another issue with the investors is that these investors either care about the whole stock portfolio or just about the value of each single security in their portfolio and thus ignore the correlations. The concept of ownership society has been promoted in the recent years where people can take better care of their own lives and be better citizen too if they are both owner of financial assets and homeowners. As a researcher suggested that in order to improve the lives of less advantaged in our society is to teach them how to be capitalist, In order to put the ownership society in its right perspective, behavioral finance is needed to be understood. The ownership society seems very attractive when people appear to make profits from their investments. Behavioral finance also is very helpful in understanding justifying government involvement in the investing decisions of individuals. The failure of millions of people to save properly for their future is also a core problem of behavioral finance. (Shiller, 2006) According to (Glaser et al, 2003) there are two approaches towards Behavioral Finance, where both tend to have same goals. The goals tend to explain observed prices, Market trading Volume Last but not the least is the individual behavior better than traditional finance models. Belief Based Model: Psychology (Individual Behavior) Incorporates into Model Market prices Transaction Volume. It includes findings such as Overconfidence, Biased Self- Attrition, and Conservatism Representativeness. Preference Based Model: Rational Friction or from psychology Find explanations, Market detects irregularities individual behavior. It incorporates Prospect Theory, House money effect other forms of mental accounting. Behavioral Finance and Rational debate: The article by (Heaton and Rosenberg,2004) highlights the debate between the rational and behavioral model over testability and predictive success. And we find that neither of them actually offers either of these measures of success. The rational approach uses a particular type of rationalization methodology; which goes on to form the basis of behavior finance predictions. A closer look into the rational finance model goes on to show that it employs ex post rationalizations of observed price behaviours. This allows them greater flexibility when offering explanations for economic anomalies. On the other hand the behavior paradigm criticizes rationalizations as having no concrete role in predicting prices accurately, that utility functions, information sets and transaction costs cannot be ‘rationalized. Ironically they also reject the rational finances explanatory power which plays an essential role in the limits of arbitrage, which actually makes behavioral finance possible. Milton Friedmans theory lays the basis of positive economics. His methodology focuses on how to make a particular prediction; it is irrelevant whether a particular assumption is rational or irrational. According to this methodology, the rational finance model relies on a limited â€Å"assumption space since all assumptions that are supposedly not rational have been eliminated. This is one of the major reasons behind the little success in rational finance predictions. Despite the minimal results, adherents of this model have criticized the behavioral model as lacking quantifiable predictions that are based on mathematical models. Rational finance has targeted a more important aspect in the structure of the economy, i.e. investor uncertainty, which further cause financial anomalies. In explaining these assertions, the behavioural emphasises the importance of taking limits in arbitrage. Friedmans methodological approach falls into the category ‘instrumentalism, which basically states that theories are tools for predictions and used to draw inferences. Whether an assumption is realistic or rational is of no value to an instrumentalist. By narrowing what may or may not be possible, one will inevitably eliminate certain strategies or behaviors which might in fact go on to maximize utility or profits based on their uniqueness. An assumption could be irrational even in the long run, but it is continuously revised and refined to make it into something useful. In opposition to this, many individuals have gone on to say that behaviouralists are not bound by any constraints thus making their explanations systematically irrational. Rubinstein (2001) described how when everyone fails to explain a particular anomaly, suddenly a behavioral aspect to it will come up, because that can be based on completely abstract irrational assumptions. To support rationality, Rubinstein came up with two arguments. Firstly he went on to say that an irrational strategy that is profitable, will only attract copy cat firms or traders into the market. This is supported when a closer look is given towards limits to arbitrage. Secondly through the process of evolution, irrational decisions will eventually be eliminated in the long run. The major achievements characterized of the rational finance paradigm consist of the following: the principle of no arbitrage; market efficiency, the net present value decision rule, derivatives valuation techniques; Markowitzs (1952) mean-variance framework; event studies; multifactor models such as the APT, ICAPM, and the Consumption- CAPM. Despite the number of top achievements that supporters of the rational model claim, the paradigm fails to answer some of the most basic financial economic questions such as ‘What is the cost of capital for this firm? or ‘What is its optimal capital structure?; simply because of their self imposed constraints. So far this makes it seem like rational finance and behavioral finance are mutually exclusive. Contrary to this, they are actually interdependent, and overlap in several areas. Take for instance the concept of mispricing when there is no arbitrage. Behavior finance on the other hand suggests that this may not be the case; irrational assumptions in the market will still lead to mispricing. Further even though certain arbitrageurs may be able to identify irrationality induced mispricing, because of the imperfect market information, they are unable to convince investors of its existence. Over here, the rational model is accepting the existence of anomalies which are affected both through the factors of risk and chance; therefore coinciding with the perspective of behavioral finance. Two instances are clear examples of how rationalization is an important limit of arbitrage: i) the build-up and blow-up of the internet bubble; and ii) the superiority of value equity strategies. If we focus on the latter, we are able to see behavioral finance literature that highlights the superiority of such strategies in the ability of analysts to extrapolate results for investors. This is possible when rationalization is taken as a limit to arbitrage. Similarly these strategies may also limit arbitrage against mispricing, through the great risk associated with stocks. In explaining most anomalies it is essential that analysts first conclude whether pricing is rational or not. To prove their hypothesis that irrationality-induced mispricing exists, behaviouralists may find it easier if they accepted the role of rationalization in limits of arbitrage. Slow information diffusion and short-sales constraints are other factors that explain mispricing. However these factors alone cannot form the basis of a strong and concrete explanation that will clarify pricing across firms and also across time. Those supporting the rational paradigm attack behavioral finance adherents in that their predictions for the financial market have been made on irrational assumptions; that are not supported by concrete mathematical or scientific models. In their view the lack of concrete discipline in the methodology adopted in behavior finance leads to the lack of testing in their forecasts. On the other hand the rational model is criticized for its lack of success in financial predictions. The behaviouralists claim that this limitation exists because the supporters of rational finance dismiss aspects of the economic market simply because it may not fall into explainable rational behavior. Both perspectives claim to align themselves with respect to the goals of ‘testability and ‘predictions, while at the same time continue to offer evidence against the other model. In reality however, rather than being exclusively mutual both paradigms assist one another in making their predictions. BODY: A cognitive bias is a persons tendency to make errors, based on cognitive factors. Forms of cognitive bias include errors in statistical judgment, social attribution, and memory that are common to all human beings. (Crowell, 1994, p. 1) â€Å"Cognitive bias is the tendency of intelligent, well-informed people to consistently do the wrong thing†. The reason behind this cognitive bias is that the Human brain is made for interpersonal relationships and not for processing statistics. The paper discusses facility of forecasts. Generally it is said that the world is divided into two groups. One who forecasts positively and one negatively. These forecasts exaggerate the reliability of their forecasts and trace it to the â€Å"illusion of validity† which exists even when the illusionary character is recognized. (Fisher and Statman, 2000) discussed five cognitive bias, underlying the illusion of validity that are Overconfidence, Confirmation, Representativeness, Anchoring, and Hindsight (Shiller, 2002) discusses, that irrational behavior may disappear with more learning and a much more structured situation. As the past research proves it that may of cognitive biases in human judgment value uncertainty will change, they may be convinced if given proper instructions, on the part-experience of irrational behavior. There are three main themes in behavioral finance and economics Heuristics: People often make decisions based on approximate rules of thumb, not strictly rational analysis. See also cognitive biases and bounded rationality. Prospect theory Loss aversion Status quo bias Gamblers fallacy Self-serving bias Money illusion Framing: The way a problem or decision is presented to the decision maker will affect their action. Cognitive framing Mental accounting Anchoring Market inefficiencies: There are explanations for observed market outcomes that are contrary to rational expectations and market efficiency. These include mis-pricings, non-rational decision making, and return anomalies. Richard Thaler, in particular, has described specific market anomalies from a behavioral perspective. Anomalies (economic behavior) Disposition effect Endowment effect Inequity aversion Intertemporal consumption Present-biased preferences Momentum investing Greed and fear Herd behavior Anomalies (market prices and returns) Equity premium puzzle Efficiency wage hypothesis Limits to arbitrage Dividend puzzle Models in behavioral economics are typically addressed to a particular observed market anomaly and adjust standard neo-classical models by describing decision makers as using heuristics and being affected by framing effects. In general, economics sits within the neoclassical framework, though the standard assumption of rational behavior is often challenged. Loix et. Al in their paper â€Å"Orientation towards Finances† explains the individual financial management behavior, people dealing with their financial means. They have analyzed the Non-specific Financial behavior as already we see extensive research on the specific finance behavior such as saving, Taxation, Gambling, amassing debt. But they had given a lot of importance to stock market, investors and households. The analysis of general public`s behavior was done, where an ordinary man is not sure and simply act according to the guesses over their money related issues. It was also found that people interested in economic and financial matters are much more active in collecting specific information than general public, stating that financial behavior of household is an important relevant topic that needs to be discussed in much more details. Household financial management is similar to the financial management. The construct of orientation towards finances was developed where the individual ORTO FIN focuses on competencies (interest and skills). Having stronger money attitude is an indication of stronger orientation towards finances and much more effective competencies. Therefore we expect some relevance and similarity between corporate and household management behavior as both require organizing, forecasting, planning and control. (Loix et. al, 2005) analyzed general publics behavior in basically dividing them into two groups, Financial Information Personal financial planning. Also explaining some practical and theoretical gaps in the area of psychology of money usage, they concluded that ORTOFIN (Orientation towards finance) indicates the involvement of individuals in managing their finances. Proving out the point that active interest in financial information and an urge to plan expenses are two main factors. A stronger ORTFIN indicates: Greater use of debit accounts, Higher savings account, Wide variety of investments, Greater awareness of ones financial Intimate knowledge of the details of Ones savings/deposit accounts obsessed by money, Higher achievement and power in monetary terms, Further age is also inversely proportional. Shiller in 2006, in his article talked about the the co-evolution of neo-classical and behavior finance. In 1937 when A. Samuelsson one of the great economists wrote about people maximizing the present value of utility subject to a present vale budget constraint. Another judgment he realized was time being consistent human behavior where if at any time t 0 Where people reconsidered the problem of maximization from that date forward, they would not change their decision where as in real life it is totally opposite for example people sometimes try to control themselves by binding their future decision as from history we find out that that some of man make irrevocable trust in the taking out of life insurance as a compulsory savings measure. (shiller, 2006, p.) Considering personal saving rate, saving and down for no reason has emerged as a weakness of human self control. People seem to be vulnerable to complacency from time to time about providing for their own future. The distinction between neoclassical and behavioral finance have therefore been exaggerated. Both of them are not completely different from each other. Behavioral finance is more elastic willing to learn from other sciences and less concerned about the elegance of models whereby explaining human behavior Investing and cognitive bias: Money Managers Money management is a very popular phenomenon. The performance in the stock market is measured at the daily basis and not to wait for a highly subjective annual review of ones performance by ones superior. Market grades you on a daily basis. The smarter one is, the more confident one becomes of ones ability to succeed, clients support them by trusting them that eventually helps their careers. But the truth is that few money managers put in sufficient amount of time and effort to figure out what works and develop a set of investment principles to guide their investment decisions (Browne, 2000). Further Browne discussed the importance of asset allocation and risk aversion, in order to understand why we do what we do regardless of whether it is rational or not. General public opts for money Managers to deal with their finances and these managers are categorized in three ways: Value Managers, Growth Managers and Market Neutral Managers. The vast majority of money managers are categorized as either value managers or growth managers although a third category, market neutral managers, is gaining popularity these days and may soon rival the so-called strategies of value and growth. Some investment management firms even are being cautious by offering all styles of investments. What too few money managers do is analyze the fundamental financial characteristics of portfolios that produce long-term market beating results, and develop a set of investment principles that are based on those findings. Difference of opinion on the definition of Value is the problem.The reasons for this are two-fold, one being the practical reality of managing large sums of money, and the other related to behavior. As the assets under management of an advisor grow, the universe of potential stocks shrinks Analyzing that why individual and professional investors do not change their behavior even when they face empirical evidence, that suggests that their decisions are less than optimal. An answer to this question is said to be that being a contrarian may simply be too risky for the average individual or professional. If a person is wrong on the collective basis, where everyone else also had made a mistake, the consequences professionally and for ones own self-esteem are far less than if a person is wrong alone. The herd instinct allows for the comfort of safety in numbers. The other reason is that individuals try to behave the same way and do not tend to change courses of action if they are happy. If the results are not too painful individuals can be happy with sub-optimal results. Moreover, individuals who tend to be unhappy make changes often and eventually end up being just as unhappy in their new circumstances. According to the traditional view of Investment management, fundamental forces drive markets, however many other investment firms considers to be active and working out based on their experienced Judgment. It is also believed that Judgmental overrides of Value Fundamental forces of markets can be lethal as well as a cause of Financial Disappointment. From the history it has been found that people Override at the wrong times and in most cases would be better off sticking to their investment disciplines (Crowell, 1994) and the reason to this behavior is the Cognitive bias. According to many researchers, stocks of small companies with low price/book ratios provide excess returns. Therefore, given a choice among small cheap stocks large high priced stocks, prominent investors (financial analysts, senior company executives and company directors) will certainly prefer the small cheap ones. But the fact is opposite to this situation where these prominent investors would opt for large high priced ones and so suffer from cognitive bias and further regret. According to a survey in 1992/1993, a research was carried out that included senior executives directors where they were suppose to rate companies in their industries on eight factors: Quality of management, Quality of products services, Innovativeness, Long term investment value, Financial soundness, Ability to attract, develop and keep talented people, Responsibility to the community and environment, Wise use of corporate assets. The assumptions that we made were that that â€Å"Long term investment value should be negatively correlated with size since small stocks provide superior returns. Long term Investment value should have a negative correlation with Price/book since low Price/Book stocks provide superior returns†.(Crowell, 1994). Whereas the results of the survey were contrary that stated that Long Term Investment had a positive correlation with the size and also that the Long term investment value had a positive correlation with the Price/Book stocks. According to Shefrin and statman, prominent investors overestimate the probability that a good company is a good stock, relying on the representative heuristics, concluding that superior companies make superior stocks. Aversion to Regret: aversion to regret is different from aversion to risk, Regret is acute when the individual must take responsibility for the final outcome. Aversion to regret leads to a preference for stocks of good companies. The choice of the stocks of bad companies involves more personal responsibility and higher probability of regret. Therefore, we find there are two major Cognitive errors: â€Å"We have a double cognitive error: a Good company make good stocks (representativeness), and involves less responsibility(Less aversion to regret† (Crowell, 1994,p.3) The Anti Cognitive bias actions would be admitting to your owned stocks, admitting earlier investment mistakes. Further Taking the responsibility for the actions to improve their performance in the future. The reasons for all the available disciplines, tools, and quantitative techniques is to deal with the Cognitive bias error, where the quantitative investment techniques enables the investment managers to overcome cognitive bias, follow sound investment, and eventually be successful contrarian investor(one who rejects the majority opinion, as in economic matters). Behavioral finance also is very helpful in understanding justifying government involvement in the investing decisions of individuals. The failure of millions of people to save properly for their future is also a core problem of behavioral finance. With the help of two very important examples Shiller explains how Government involvement can influence financial investments of individuals. In April 2005 â€Å"Tony Blair† stated a program when all new born babies were given a birthday present of 250 to 500. The present were to choose among a number of investment alternatives to invest until child comes of age. This is an effect done in order to make the parents feel connected with investments and modern economy. Another example: as it is said that people should be heavily active in stock market when they are young and so generally should reduce the activity with age. According to the conventional rule people should have 100 Age = % age of investment In 2005 president bush also portfolio announced one such plan for personal account â€Å"life cycle fund† which would be among the option that works will be offered to invest their personal account. It was A centerpiece of the presidents proposal bur a major point to be noticed was the default option. An important aspect of behavioral finance is the human attention is capricious focuses heavily tat same times on financial calculations and are subject to distraction and dissipation of default option is central. All this brings us a question that what should an intertemporal optimizer do to manage his portfolio over the lifetime. According to Samuelson someone who wished to maximize the expected value of his intertemporal utility function by managing the allocation of the portfolio between a high yielding asset and less yielding asset would not actually change the allocation through time. Neoclassic finance appears highly relevant to such a discussion in that it offers the appropriate theoretical framework for considering what people ought to do with the portfolio if not what they actually do. Behavioral is beginning to play an important role in public policy such as in social security reforms. Agents Rationality: Global culture Culture Social Contagion: The selective attention exhibited by a human mind is the concept of culture. Every nation, tribe or asocial group has a social cognition reinforced by conversation ritual and symbols, rituals and supposition of a particular nation has a subtle but far reliability affect on human behavior. Some researchers found that the unique customs of people actually arise as a logical consequence of a belief system of a nation group of people. Cultural factor were found to have great influence on rational or irrational behavior. We find many factors that are same across countries , e.g fashion, music, movies, youthful rebellious, other than these we find more factors in producing internationally- similar human behaviors then just rational reactions. Therefore it is a difficult job to decide in what avenues global culture exerts