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The real culprit behind irrational financial decisions

the real culprit behind irrational financial decisions

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By Dr. Neelam Rani and Rohit GargIn his book “Thinking, Fast and Slow,” Daniel Kahneman, Nobel Prize-winning economist, has written, “you think with your body, not only with your brain.”
Decisions taken by humans are affected by the biases and emotions that may distort our best rational judgment. All of our decisions are widely varied by factors like sleep, hunger, emotions, and other physiological factors. The decisions affected can be very general, like whether to talk to someone; or very complicated like a financial decision. The relationship between the financial system and emotions becomes more complex with time as the financial system evolves, but emotions don’t.
Human brains are not rational computers; emotions play a vital role in this, and what controls human emotions is the hormones. Hormones guide the choices of humans and even their risk perception. Testosterone, the male hormone (found in females in minimal amount), is associated with aggressive behavior, confidence, competition, and optimism, whereas cortisol is connected with fear, risk-averse behavior.
If a person has a high level of testosterone, such as in a stressful or a competitive environment, then they will have higher confidence, and they will be more optimistic. For example, a person with …

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Americans need more guidance from the Fed

americans need more guidance from the fed

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YOU MAY think that central banking is a sort of macroeconomic engineering—tweaking an interest rate here or a financial regulation there. But psychology enters into it, too. In order to achieve strong growth, people need to spend today as if the health of tomorrow’s economy were assured. That makes communication critical. Early on Jerome Powell, the chairman of America’s Federal Reserve, showed signs of an aptitude for managing collective confidence. He is plain-spoken, with a charm that often eludes economic policymakers. But now he faces a truly forbidding environment. Both his legacy and the trajectory of America’s recovery depend on how he wields the credibility he has earned.When Mr Powell took over as chairman in 2018, expectations of him were modest. President Donald Trump chose him rather than offering Janet Yellen—a respected economist—a second term, even though she had done the job ably. Mr Powell had studied law not economics, and spent most of his career in finance. Though a Republican, he had been nominated to the Fed’s Board of Governors by Barack Obama, Mr Trump’s predecessor, as a concession to Congressional Republicans, who habitually stonewalled his Democratic nominees.In fact the …

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The pandemic revives ultra-safe European bonds

the pandemic revives ultra-safe european bonds

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THE EURO ZONE has not been a hospitable place for investors seeking safety in recent years. The currency area’s pool of super-safe, AAA-rated sovereign securities shrank by 40% between 2007 and 2018. Rating agencies downgraded some of its members during the debt crisis of 2010-12. Two of its remaining top-rated issuers—Germany and the Netherlands—have energetically hacked away at their debt piles.The pandemic might help alleviate the shortage. Germany, once fixated on its “black zero”, or balanced budget, will go deeply into the red. It may run a fiscal deficit of as much as 7.5% of GDP this year, reckons the Bundesbank. A raft of issuance may also come from an unusual source: the European Commission. If plans for it to finance the EU’s recovery spending go ahead, it could become a big influence in global capital markets.The commission already issues a modest amount of bonds on behalf of the European Union, which it mostly lends on to member states. Its debt stock amounts to €52bn ($59bn, or 0.4% of EU GDP in 2019). Plans to fund the recovery from the pandemic will take this much higher. From September it will raise €100bn, which it will in turn lend to countries …

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Europeans quibble about long trading hours: the finance edition

europeans quibble about long trading hours: the finance edition

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IN THE POPULAR imagination, Americans toil endlessly in the office while their European counterparts arrive late, lunch at leisure and depart punctually. If that were ever true equity traders were never let in on the scheme. Opening hours on stockmarkets in Europe are some of the longest in the world, keeping financiers at their Bloomberg terminals far longer than those following American or Asian bourses. Despite that, a proposal to cut back trading hours is making little headway.That European markets open early and close late is partly a function of geography. Frankfurt, London and Paris (among others) aspire to be a kind of bridge between Asia, where stock exchanges close as Europe opens, and America, which gets going towards the end of its trading day. But that means eight-and-a-half hours of trading, from 9am to 5:30pm. That is two more than at the New York Stock Exchange, where vastly more shares switch hands. Tokyo’s market is open for just six hours, interrupted by lunch.Late last year trade groups representing investors that buy shares and bankers that sell them had together suggested to operators of European stockmarkets that the working day be shortened. Opening an hour later and …

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Northward Financial Planners, partners settle case with Sebi

northward financial planners, partners settle case with sebi

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Northward Financial Planners and its three partners have settled with Sebi a case related to alleged violation of Investment Advisers (IA) norms by paying over Rs 21 lakh towards settlement charges. A total amount of Rs 21,67,500 has been paid by Northward Financial Planners (NFP) and its partners — Thejus Palathingal, Diya Thommy and Vidya Krishnamoorthy, Sebi said in an order on Thursday.
It was alleged that NFP was carrying out investment advisory activities since financial year 2013-14, prior to it filing application with Sebi for grant of registration as investment adviser.
NFP generated a total revenue of Rs 15.47 lakh from 2013 till July 2017 by rendering investment advisory services to 73 clients.
NFP and partners filed application for registration as investment advisor after a delay of over four years and continued to carry out investment advisory activity without seeking registration, thereby violating the provisions of IA Regulations, the regulator said in the settlement order.
Thereafter, the regulator received an application for settlement from NFP and its partners (applicants).
The applicants were called for a meeting with the internal committee (IC) of Sebi.
Pursuant to the IC meeting, the applicants submitted revised settlement terms and the matter was placed before Sebi’s High Powered Advisory Committee …

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Sudan replaces finance, foreign and energy ministers in sweeping reshuffle

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FILE PHOTO: Sudan’s Prime Minister Abdalla Hamdok addresses the media at the Chancellery in Berlin, Germany, February 14, 2020. REUTERS/Hannibal Hanschke/File PhotoCAIRO (Reuters) – Sudan’s prime minister replaced the finance, foreign, energy and health ministers and three other senior cabinet post-holders on Thursday as part of a sweeping reshuffle, the government said. Authorities had said a reshuffle was coming, but few had expected the exit of Ibrahim al-Badawi, who as finance minister led efforts to steady Sudan’s crisis-stricken economy and liaised with foreign donors. The government said transitional Prime Minister Abdalla Hamdok had dismissed the health minister and accepted the resignation of Badawi and the others. It named interim replacements to lead all seven ministries. Hamdok leads a government of technocrats under a 39-month power-sharing agreement between the military and civilian groups, following the removal of long-time President Omar al-Bashir last year. Badawi’s interim replacement will be Heba Ahmed Ali, a senior finance ministry official, the government statement said. The reshuffle comes nine days after large street protests demanding faster and more comprehensive reforms from transitional authorities. On the eve of the protests, Hamdok had promised to take a number of major decisions, without giving details. Earlier …

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Supreme Court Rules Trump Cannot Block Release of Financial Records

supreme court rules trump cannot block release of financial records

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WASHINGTON — The Supreme Court on Thursday cleared the way for prosecutors in New York to see President Trump’s financial records, a stunning defeat for Mr. Trump but a decision that probably means the records will be shielded from public scrutiny under grand jury secrecy rules until after the election, and perhaps indefinitely.In a separate decision, the court ruled that Congress could not, at least for now, see many of the same records. The vote in both cases was 7 to 2. Chief Justice John G. Roberts Jr. wrote both majority opinions.In the case concerning the prosecutors’ subpoena, he wrote that “no citizen, not even the president, is categorically above the common duty to produce evidence when called upon in a criminal proceeding.” He added that Mr. Trump may still raise objections to the scope and relevance of the subpoena.The court’s four more liberal members joined that majority opinion, and Mr. Trump’s two appointees voted with the majority but did not adopt its reasoning.In the case concerning congressional subpoenas, Chief Justice Roberts wrote that lower courts had not adequately considered the separation of powers concerns raised in the case. He was joined by the same justices …

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The International Finance Facility for Education: A vital instrument to mitigate the impact of the pandemic

the international finance facility for education: a vital instrument to mitigate the impact of the pandemic

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We are experiencing an extraordinary global crisis with devastating impacts that will be felt for generations. At the height of the pandemic, nearly 1.6 billion children and youth—more than 90 percent of the world’s student population—had their education disrupted due to school and university closures in more than 190 countries. Sixty-three million teachers, the wider education workforce, communities, and parents are all grappling with ways to ensure that learning does not stop.

We cannot neglect education in this crisis
While global attention is focused on urgent health needs and social protection, the international community must be proactive in safeguarding other sectors as well to help mitigate the long-term damage from the crisis, especially to the poorest and most vulnerable populations. Crucially, we cannot lose sight of education, which will be adversely affected both by the pandemic itself—due to widespread, prolonged school closures—and the associated financial crisis, which will squeeze government budgets. These challenges will further exacerbate the global learning crisis that was already threatening the livelihoods of tens of millions of children before the onset of the pandemic.
Given that education is an essential catalyst for progress on all development goals—especially poverty reduction, health, gender equality, and …

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Senmiao Technology Announces Financial Results for Fiscal Year Ended March 31, 2020

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Online Ride-hailing Related Automobile Business Continues to ExpandCHENGDU, China, July 9, 2020 /PRNewswire/ — Senmiao Technology Limited (NASDAQ: AIHS) (“Senmiao”), a provider of automobile transaction and related services targeting the ride-hailing industry in China, today announced its financial results for its full fiscal year ended March 31, 2020.Fiscal Year 2020 HighlightsRevenue from automobile transaction and related services business increased by 514% year-over-year to $15,655,575 from $2,551,107; Revenue from sales of automobiles expanded to $11,536,691, up 535% from $1,815,425 in the prior year; Gross profit from automobile transaction and related services business increased by 357% year-over-year to $3,375,337 from $738,920; Number of facilitated new automobile purchase increased by 323% year-over-year to 1,315 from 311; In Fiscal Year 2020, there were over 2,300 new drivers joining Senmiao’s online ride-sharing business”Although we faced a significantly weaker operating environment as a result of COVID-19 in our fiscal fourth quarter after maintaining profitability through the first nine months, we grew our streamlined automobile transaction and related services revenue by five-fold” commented Xi Wen, Chairman, Chief Executive Officer and President of Senmiao. “We continue to believe in the huge long-term market opportunity resulting from the rapid development of the online ride-hailing service industry in China. Our near-term strategic business focus has shifted from the facilitation of automobile transactions and financing to providing more …

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