Participation of Citizens in Public Financial Decision-Making in Serbia

Participation in the local public finance decision-making process in Serbia is not a new concept as it was implemented even during the ‘Titoistic’ period. However, direct participation is still in an infant phase altogether with the low interest of citizens in participating in local financial decision-making procedures. The aim of this paper is to explain the main types of civic participation in the local financial decision-making process (i.e., referendum voting on self-imposed contribution, participatory budgeting, and civic crowdfunding) and to focus on the main factors that lead to a low participation of citizens in such processes. Additionally, the article analyses how these factors affect general mistrust in politics and society. For this purpose, a total of N=421 citizens were interviewed. Using the principal component analysis, the following three main components for low participation were defined: 1) lack of knowledge, 2) lack of interest, and 3) lack of political will. Thereafter, using the regression analysis, the study confirmed that the first two components are statistically significant predictors for mistrust in politics and society.

Uncertain Portfolio Optimization based on Dempster-Shafer Theory

Nowadays, the selection and management of the optimal portfolio are the most primary fields of financial decision-making. Thereby, selecting a portfolio capable of providing the highest efficiency and, at the same time, the lowest investment risk has been turned into one of the most critical concerns among financial activists. However, in this selection, the two factors above are not the only determining ones. Various factors are affecting financial markets' behavior under different possible scenarios, which should be identified. In this paper, we examine the high sensitivity of the Iranian capital market to the exchange rate fluctuations in the different scenarios due to the lack of a unified view of the value of that rate among experts as one of the mentioned factors and obtain its value using Dempster–Shafer theory (DST). Then, a portfolio selection model that prefers stocks with higher ranks is proposed. Representative results of the real-life case study reveal that the submitted approach is productive and practically applicable.

FINANCIAL DECISION MAKING AMONG YOUNG ADULTS: AN AHP APPROACH

In an uncertain economic environment, the decision-making process regarding personal finances relies heavily on personal experience and behavior, and is largely influenced by a variety of psychological and socio-demographic factors. The aim of this paper is to analyze the key factors of the decision-making process regarding financial choices of the population of young adults in the Republic of North Macedonia, and to further explain young people’s motives for the proposed decision and the conditions under which the decision was made. The research was conducted through an AHP-based questionnaire that was distributed to respondents ranging in age from 18 to 35 years. According to the obtained results, the respondents value financial security the most, hence their primary choice is investment in real estate and commodities. Young adults are less inclined to invest, especially in the more complex financial instruments. The developed AHP model will help young people make better, fact-based financial choices.

Do Emotions Benefit Investment Decisions? Anticipatory Emotion and Investment Decisions in Non-professional Investors

Increasing financial trading performance is big business. A lingering question within academia and industry concerns whether emotions improve or degrade trading performance. In this study, 30 participants distributed hypothetical wealth between a share (a risk) and the bank (paying a small, sure, gain) within four trading games. Skin Conductance Response was measured while playing the games to measure anticipatory emotion, a covert emotion signal that impacts decision-making. Anticipatory emotion was significantly associated with trading performance but the direction of the correlation was dependent upon the share’s movement. Thus, anticipatory emotion is neither wholly “good” nor “bad” for trading; instead, the relationship is context-dependent. This is one of the first studies exploring the association between anticipatory emotion and trading behaviour using trading games within an experimentally rigorous environment. Our findings elucidate the relationship between anticipatory emotion and financial decision-making and have applications for improving trading performance in novice and expert traders.

Examining the Effect of Short-Term Affect on Farmers’ Risk and Time Preferences in Financial Decision-Making

Farmers regularly make intertemporal decisions under risk or uncertainty. To improve how farmers behave when faced with decisions that have financial consequences, there is a need for a deeper understanding of farmers’ risk and time preferences. While the relationship between individual components of affect and risk preferences is well documented, the same cannot be said for holistic measures of affect on one hand, and for affect and time preferences on the other hand. The data analysed in this paper is the 2014–2015 Indonesian Family Life Survey Wave 5. The survey included experimental measures designed to elicit both risk and time preferences from the same subjects. We analysed the data using limited dependent variable regression models. Our findings strengthen what is known about the affect infusion model. With increased pleasant affect, farmers’ willingness to take risks increases significantly. The results also suggest that pleasant affect is associated with increased odds that farmers will choose future rewards in the long horizon but had no statistically significant effect on the short horizon. The practical implications are that an experience of pleasant affect before decision-making may cause the decision-maker (DM) to perceive a prospect as having high benefits and low risks. Pleasant affect may also induce lower sensitivity towards losses and play the role of a buffer which reduces the immediate negative impact of information that otherwise would prevent the DM from focusing on the long-term. JEL Classifications: C93, D81, D91

Cognitive Overload: How to Protect Older Adults From Diminished Financial Decision-Making Capacity

The aging population in the US poses a major threat to the financial security of older adults and their families. Millions of older adults will need to successfully navigate a multitude of financial and legal issues if they are to safely manage their assets while they are alive, and then securely transfer trillions of dollars to their heirs in accordance with their wishes. But most older adults are less healthy than their younger counterparts, and 25% or more over 65 are likely to suffer from diminished decision-making capacity. In short, older adults in the US will have to make some of the most important financial decisions of their lives just as their decision-making capacity is in decline. We offer recommendations to make it easier for financial services firms, medical professionals, non-profit organizations, and technology companies to work together to find better solutions for managing the complex issues around diminished decision-making capacity that is only likely to worsen in the years ahead.