CHAPTER 10: Discussion Questions and Problems
1. Differentiate the following terms/concepts:
a. Regret and disappointment
Regret and disappointment are negative emotions. When a person is disappointed he is
b. House money and break-even effects
c. Affect (noun) and affect (verb)
d. Bad mood and depression
2. In housing markets, there is a positive correlation between prices and trading
volume. When there is a housing boom, many houses sell at, or even above, the prices
asked by sellers. In times of bust, homes sit on the market for a long time with asking
prices that exceed the prices that can reasonably be expected. How can this be
explained?
3. Some investment banks engage in proprietary trading, which means that the
firm’s traders actively trade financial securities using the bank’s money, in order to
generate a profit. To offset a slowdown in one division, traders in a profitable division
might more actively engage in proprietary trading. Do you think this practice is wise?
4. This morning I woke up in a sour mood because my favorite team lost its
game yesterday. Then I had to wait an extra long time in line for coffee. It
started to rain and I forgot my umbrella in the car. When I arrived at my office
(finally) I found that a stock I held in my portfolio was falling in value so I sold.
Is this evidence that mood moves markets?
5. What does research based on the game show Deal or No Deal tell us about
path-dependence and integration vs. segregation of gambles?