THE PACIFIC FUTURES TRADING COMPANY

 Questions 1. What type is Sam’s research (exploratory, descriptive or causal)? Use a few sentences to support your answer. 2. According to the “research methods” on page 2, what reasoning did Sam use (inductive or deductive)? Use a few sentences to support your answer. 3. What are the dependent variable (DV) and the independent variable (IV) in the H1 (page 2)? Use a few sentences to explain why IV and DV have a negative relationship. 4. In H2 (page 2), how would you like to define “Successful traders”? Is there any problem with the H2? Explain. How would you like to rewrite the H2? For some time, theoretical and empirical evidence suggested that the Efficient Market Hypothesis, the Capital Asset Pricing Model, and other rational financial theories did a good job of predicting and explaining the behavior of investors. However, recently, the ‘rationality’ of financial markets – and more specifically investors – is a hot topic in the financial economics literature. Recent research has argued and shown that investors often make mistakes; they behave irrational and exhibit a number of financially damaging biases, such as loss aversion, herding, overconfidence, and overreaction (Barber and Odean, 2001; DeBondt and Thaler, 1986; Fischoff and Slovic, 1980; Gervais and Odean, 2001; Huberman and Regev, 2001; Kahneman and Tversky, 1979). These irrationalities are frequently attributed to psychological factors such as fear, greed, regret, and other emotional responses to price changes and changes in personal wealth. A growing number of economists, psychologists, and financial-industry professionals have begun to use the terms ‘behavioral economics’ and ‘behavioral finance’ to differentiate themselves and their ideas from the standard, rational theories (such as the Efficient Market Hypothesis) in economics and finance. Akrisios Stathopoulos is the President of the Pacific Futures Trading Company (PFTC). Futures trading is a form of investment which involves speculating on the price of a commodity, such as gold, cotton, wheat, or steel, going up or down in the future. Futures are popular instruments amongst traders, from private individuals through to multi-million dollar hedge funds. Founded in 1972, the Pacific Futures Trading Company is a second generation family-owned business. With Akrisios as President, his brother Epifanio as Vice President of Finance, and his other brother Sirius as Vice President of Human Resources, the Stathopoulos brothers are strongly committed to creating customer satisfaction. Like futures trading, the Pacific Futures Trading Company has grown exponentially over the last decade. Hence, the company spends a lot of time and money on recruitment and training. In futures trading, it is crucial to attracting, screen, and select qualified people for the job and then to train these new employees to become successful traders. To be a successful trader takes patience, but also determination, discipline, and education. Indeed, learning how to trade is a process that takes time.