0 w -U---- V V v w w w I -6 Te ic iganDaly- edesay M rc- 1, S00 I Wedesday Marh 14,2007 -hMiignDly 3 The riches of irrationality Unknown nknowns Science Column Buy low and sell high. In other words, buy when it's cloudy outside but sell when the sun is shining. Yes, aspects of the weather do affect stock markets after all. In a 2001 paper, Ross School of Busi- ness Prof. Tyler Shumway and a colleague showed the existence of the sunshine effect, which says the amount of cloud cover in the vicin- ity of major international stock mar- kets has a significant correlation with trading patterns for the day. Moreover, this significance rises into relevance as researchers show that the sunshine effect will deliv- er higher returns - even taking into account the transaction costs incurred with trading to the vicis- situdes of meteorology. Outdated economics philoso- phies would predict otherwise; the market must be too intelligent to be tricked by something as simple as the weather. But the maturing field of behavioral economics holds that the hyper-intelligent, hyper- responsive market is just composed of very many, very fallible people. People whose dispositions range from sunny to gloomy. Shumway's data suggests that beneath all of our layers of rational- ity, behind our endless research, data analysis and hand-wringing, a much simpler factor may partially explain our economic behaviors: our moods. In the last few decades, the brain research revolution has swept into the provinces of economics and finance. The intersection of behav- PATRIOTS From page 5B white shirt of an Orkin bug exterminator, came out of a back entrance and aimed his flashlight at the cracks in the wall next to me. The Orkin logos on his hel- met and shirt, which had looked like they were printed off the Internet when I saw them close up just minutes earlier, looked completely real from my new vantage point. At that moment, it all hinged on the professor. He took a sip of his coffee and said into his microphone, "Wow, that's pretty bad - looking for bugs in a programmingclass." It wasn't a bad joke and it meant that the professor bought the disguise. A large crowd gathered outside of Stucchi's ice cream shop on State Street yesterday. We know consumers respond to warm tem- peratures when buying ice cream, but do balmy temperatures affect the stock market? ioral psychology and capitalist running rats through mazes. "Now scanners can produce maps of instinct has produced the offshoots we know something about how the activity to help answer the ques- ofbehavioral finance, experimental brain works," they remark over tion "What makes us tick?" Now finance and neuroeconomics. pints. "So how do we get rich?" the question is "What makes us one can imagine the beginning The ongoingthense is the import- buy?" of this unlikely union. A tweed- ing of psychological techniques Already, hazy constructs such garbed gaggle of neuroscientists - and technologies into various fields as regret and buyer's remorse are repair to the pub after a long day to tackle age-old problems. Brain being pinpointed in the brain (in the orbitofrontal cortex, the strip of grey matter right behind the eyes). Lists of cognitive biases are being compiled: Confirmation bias means we pay extra attention to what supports our position and ignore evidence to the contrary; the gambler's fallacy holds that we guess tails on the next random flip of a coin after along string ofheads; and loss aversion, which holds that we respond to losses more strongly than to equivalent gains, leading to non-optimal behavior. If economic phenomena have mental bases, perhaps mental phe- nomena have economic bases? In a neatly converse proposal, Dan Silverman, an assistant professor in the University's department of economics, suggests that things like willpower can be a depletable resource, or a fungible internal commodity. As we exercise more self-control, we "spend" more will- power. This leads to more irrespon- sible decisions later on when we are willpower-poor. There might then be markets inside of our skulls. Perhaps pro- crastination is another form of short-selling: the putting off of an assignment for later on the reason- ing that it will be less difficult then. Elsewhere in this zeitgeist are the more radical premises ofsocionomics, whichhold that peopleunconsciously tap into social moods. These social trends extend into market trends and can reportedly be predicted based on probability and innate mathemati- cal relationships. As price trends zig See SCIENCE, Page 7B it's not guaranteed that there will be another group of engineers standing ready to carry the torch. How many future students will be willing to dedicate their time and energy to flying pirate flags rather than preparing for exams? It's possible that some- day in the not-too-distant future, traffic will slow on the Patriots' website until the group fades into obscurity as a fond and bizarre memory of campus life. But if it's going to happen, it won't happen anytime soon. On Valentine's Day this year, they solidified their campus pres- ence, at least for now. The Patri- ots joined forces with another unconventional campus group, the Valentine's Day Ninjas. See PATRIOTS, Page 7B TALKING POINTS Three things you can talk about this week: 1. Possibility of a presidential pardon 2. 300 3. Green beer And three things you can't: 1. Katie Couric 2. Katherine Heigl feeling snubbed 3. The warm weather (It won't last.) BY THE NUMBERS Homicides reported in Detroit in 2006. Detroit had slightly fewer murders than Chicago, which had 467 homicides that year. The percent increase in homicides in Detroit between 2004 and 2006. Homicides increased by an average of 10.9 percent in the 56 jurisdictions surveyed nationwide. The first year since 1992 that violent crime increased nationally, when it increased by 2 percent. Source: A study by the Police Executive Research Forum and the FBI QUOTES OF THE WEEK The military answers to one com- mander in chief in the White House, not 535 commanders in chief on Capitol Hill." - VICE PRESIDENT DICK CHENEY in a speech lambasting congress for undermining the troops by lobbying for a gradual withdrawal. YOUTUBE VIDEO OF THE WEEK The nightmare on Sesame Street Sure, there's always been rumors. Never, though, has a romantic rela- tionship between "Sesame Street" muppets Bert and Ernie been actu- alized in such darkly heartbreaking fashion as in T.C. Smith and Peter Spears's "Ernest and Bertram." After Miss Piggy outs the long- time roommates in the Hollywood tabloids, Ernie comes home to the duo's L.A. mansion to find Bert struggling to hide the fact that his head was in the oven just minutes before. Over martinis in the dining room, Bert shows Ernie the head- lines: "Bert and Ernie Gay Lovers!" A revelatory conversation and excel- lent cinematography follow, based almost entirely on Lillian Hellman's "The Children's Hour." For those familiar with the play, conclusion won't come as a shock, but the inevitable ending - obvious from the moment Ernie blurts out "But maybe I love you that way, the way they say I love you!" - will still break your heart. The film is genu- inely funny, but it's also genuinely touching in its believability - don't pretend you haven't imagined such a scenario already. - KIMBERLYCHOU See this and other YouTube videos Aft- f-- ---A - I The class quieted down and the lecture began. The profes- sor started talking about the homework assignment, which many students were finding too difficult, as the clandestine Patri- ots in the audience readied their video cameras. The trap was set. A pretty girl sitting near the aisle shot up from her seat, "Orkin Man, look out!" The class turned from her to Kevin, but her cry came too late. A man dressed as a giant bug ran from the back door and landed on Kevin's back. Their struggle was epic, twisting back and forth until the bug got the best of Kevin, throwing him to the ground near the lectern. The fake punches kept coming. It looked as if the bug would exter- minate the Orkin Man, but Kevin reached into his utility belt, pulled "A significant bond is legally necessary given the fact he absconded, admittedly for one of the more unique rea- sons I've heard in my time on the bench." - RACINE COUNTY CIRCUIT JUDGE EMILY MUELLER of Wisconsin after she set the bond for accused child molester Mario Sims at $50,000. The man, 21, had cut off his security ankle bracelet and traveled to Chicago via limo to appear on "The Jerry Springer Show." "Gringo go home." -VENEZUELAN PRESIDENT HUGO CHAVEZ on Pres- ident Bush's recent visit to Latin America. out a spray can and doused the bug with what was presumably enough poison to kill a horse. The bug was dead. The Orkin Man picked up the pretty girl in his arms and ran out of the room. Once you've run around dressed as Pacman, what's left to do? I could still hear the rapturous applause as we ran out of the back door and into a neighboring bathroom. The first-year engi- neering students saw something too enjoyable to considered per- formance art and too artistic to be considered a mere prank. Underneath the costume, the bug is Randy Wan, who also sprint- ed out of a lecture hall as Super- man last year. And now that the Patriots need a new figurehead, there could be nobody more com- fortable as a leader than Randy. As an unofficial and relatively new student group, the future of the Patriots is unsure. It's a secret organization and there's neither recruiting nor an insti- tutionalized process for leader- ship succession. After Kevin, the outgoing leader, is gone, Randy is ready to take over, but when Randy and his friends graduate, THEMED PARTY SUGGESTION St. Longinus Day - Everyone knows it's St. Patrick's Day this weekend. Stand out by throw- ing a party for a lesser known saint. Celebrate St. Longinus day tomorrow by throwing a party for the saint who stabbed Jesus on the cross and was portrayed by Heath Ledger in a TV mini-series. Throwing this party? Let us know. TheStatement@umich.edu WIKIPEDIA ARTICLE OF THE WEEK Tom Monahan Tom Monaghan (born March 25, 1937 in Ann Arbor, Michigan), formally known as Thomas S. Monaghan, is an entrepreneur and Catholic philanthropist from Michigan who founded Domino's Pizza in 1960. He and his wife, the former Marjorie Zybach, a Lutheran, were married in 1962 and they have four adult daughters. He has sub- sequently dedicated his time and considerable fortune to Catholic philanthropy and conservative political causes. A champion of the right to life, Monaghan has spent hundreds of millions of dollars on philanthropy and activism, which has garnered both appreciation and criticism. Monaghan enlisted in the United States Marine Corps in 1956 (by mistake; he had meant to join the Army). He received an honor- able discharge in 1959. He then returned to Ann Arbor, Michigan and enrolled in the University of Michigan, intending to become an architect. While still a student, he and his brother James borrowed $500 to purchase a small pizza store called DomiNick's in Ypsilanti, Michigan. This business would grow into Domino's Pizza.