Research Activity - May 2019

Jachens in International Journal of Environmental Research and Public Health

Dr Liza Jachens from the Psychology Department, along with colleagues from the University of Nottingham and Loughborough University had their recent journal article chosen for the front cover of International Journal of Environmental Research and Public Health. The article was entitled "What does a single item measure of job stressfulness assess?"

The study explored what workers think about when they are asked to indicate the degree to which they find their job stressful. This is important because single-item measures of job stressfulness are proving increasingly popular among researchers and occupational health practitioners, yet little is known about precisely what such measures assess. Cognitive interviews with 55 workers revealed that the primary frame of reference was negative psychosocial working conditions, primarily high job demands. Health characteristics, predominantly poor psychological wellbeing, emerged as a secondary theme. These findings shed light on the frames of reference used to inform judgements on global job stressfulness elicited by a single-item measure and in this way contribute to the evidence base to support the application of such measures.

Paserman Contributes to a New Book about Behavioural Finance

Michal Paserman, Director of the MBA and MML Programs and Professor of Finance, contributed a chapter to the book “Behavioral Finance - The Coming of Age.” The book was edited by Itzhak Venezia and was published this month. The book is a collection of papers which explore novel avenues and future trends in Behavioural Finance and its transition into a new era.

In her chapter “Adaptive Sovereign Bond Investment Strategies During Financial Crises: An Experiment with Financial Professionals”, Paserman employs experimental methods to study the way in which financial professionals adapt investment decision-making in sovereign bonds of EMs (emerging markets) during financial crises. She finds that when the complexity of the environment increases, investors reduce information processing and shift to strategies in which they systematically focus on a selective subset of bond aspects and neglect information that is considered relevant during “normal” times. Risk-related indicators are then assigned more weight, shifting it away from return-related aspects of the bond. She proposes that systematically neglecting a specific part of relevant data under pressure and focusing on another, rather than merely narrowing a search to a random subset of information, could result in a bias. Then, EMs that are perceived as having weaknesses in the aspects on which investors anchor might be more prone to bond sell-off.

This paper continues Paserman’s work on the relation between corruption and the cost of foreign capital. In 2017 she published an article in the Journal of International Money and Finance entitled “Comovement or safe haven? The effect of corruption on the market risk of sovereign bonds of emerging economies during financial crises”. This article shows that corruption plays a prominent role in the behaviour of comovement under various market conditions. Sovereign bonds’ sensitivity to systematic shocks increases during financial crises when those bonds are issued by countries perceived to be more corrupt. The returns on bonds issued by less corrupt countries are determined more idiosyncratically under extreme market conditions and realize more hedging benefits against S&P 500 risk. To explain these findings, Paserman proposes a comovement model. When sentiment deteriorates, ambiguity-averse investors load more worldwide news on sovereign bonds issued by more corrupt countries where information uncertainty is perceived to be higher.