The Pioneer Research Journal
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The Pioneer Research Journal An International Collection of Undergraduate-Level Research Volume 4 2017 The Pioneer Research Journal An International Collection of Undergraduate-Level Research Contents Contributing Readers . iii Foreword . xiii Selection Process . xv Are Hedge Funds a Veblen Good? (Economics) . 1 Author: Georgia McKirgan School: The Portsmouth Grammar School, Portsmouth, UK Pioneer Seminar Topic: Financial Market Behavior and Misbehavior Brain Plasticity: The Effects of BrainPort Sensory Substitution (Neuroscience) . 25 Author: Elexis Hernandez Sanchez School: Dr. Kirk Lewis Career and Technical High School, Houston, Texas, USA Pioneer Seminar Topic: Understanding the Sense of Touch through Neuroscience Descartes on Other Minds: Human and Animal (Philosophy) . 51 Author: Hao Yu School: Beijing National Day School, Beijing, China Pioneer Seminar Topic: Descartes’ Meditations Deviation and Integration: How Nüshu Serves as a Centrifugal and Centripetal Force for Women in Changing Rural China (Anthropology) . 61 Author: Yilin Chen School: The Experimental High School Attached to Beijing Normal University, Beijing, China Pioneer Seminar Topic: Communication and Culture ix Divided by Discrimination: An Analysis of Racial Profiling during a Shopping Expedition (Anthropology) . 73 Author: Gabrielle Battle School: The College Preparatory School, Oakland, California, USA Pioneer Seminar Topic: Nonverbal Communication Ethical Considerations of State Responsibility toward Refugees: Analyzing China's Refugee Capacity from a Socio-Economic Perspective (International Relations) . 85 Author: Xiangyu Zheng School: International Department of the Affiliated High School of South China Normal University, Guangzhou, China Pioneer Seminar Topic: Globalization and International Migration Exposing Heat Stress Differential within the Urban Heat Island (Environmental Science) . 101 Author: Olivia R. Colombo School: Sacred Heart High School, San Francisco, California, USA Pioneer Seminar Topic: The Nexus of Buildings, Energy and the Environment Fast Video Retargeting Based on Seam Carving with Parental Labeling (Computer Science) . 111 Author: Chuning Zhu School: The Experimental High School Attached to Beijing Normal University, Beijing, China Pioneer Seminar Topic: Computers That See: Exploring New Techniques of Computer Vision Home Alone: How the Lack of Chinese Immigrant Women Caused the Failure of Chinese Immigrants to Integrate into the United States, 1848-1882 (Sociology) . 125 Author: Felix Hohne School: St. George’s School, Vancouver, British Columbia, Canada Pioneer Seminar Topic: Hyphenated Americans Identification of Reliable Predictor of Primary Spontaneous Pneumothorax Recurrence Risk (Biology) . 137 Author: Ruibing Xu School: Shenzhen Foreign Languages School, Shenzhen, China Pioneer Seminar Topic: Integrative Physiology x Investigating the Characteristics of the Optimal Point for Magnetic Nanoparticle Hyperthermia (Engineering) . 145 Author: Ege Özgüroğlu School: Robert College, Istanbul, Turkey Pioneer Seminar Topic: Introduction to Nanoscience and Nanotechnology Kiezdeutsch: A Youth Dialect in the Face of Linguistic Conservatism (Anthropology) . 159 Author: Zehan Zhou School: St. George’s School, Vancouver, British Columbia, Canada Pioneer Seminar Topic: Communication and Culture Mangrove Forests Mitigate Tsunami Hazard and Require Conservation (Environmental Science) . 175 Author: Qiqing Li School: Shenzhen Middle School, Shenzhen, China Pioneer Seminar Topic: Understanding Earthquakes and Earthquake Prediction Microneedle Transdermal Drug Delivery for Traditional Chinese Medicated Plasters (Engineering) . 197 Author: Chendan Luo School: WHBC of Wuhan Foreign Languages School, Wuhan, China Pioneer Seminar Topic: Mechanical Engineering r-bonacci Numbers, r-Lucas Numbers and Their Identities (Mathematics) . 217 Author: Yuheng Wu School: The Affiliated High School of South China Normal University, Guangzhou, China Pioneer Seminar Topic: Fibonacci Numbers and Visual Proofs Social Networks in Entrepreneurial Opportunity Recognition through Different Methods of Communication (Business) . 233 Author: Yuxin Wu School: Shanghai Pinghe Bilingual School, Shanghai, China Pioneer Seminar Topic: Examining the Factors of High-Growth High-Performance Entrepreneurship: Firms, Founders and Ecosystems Sofonisba Anguissola and Her Self-Portrait at the Easel (Art History). 249 Author: Xingzhi Jing School: Hangzhou Foreign Languages School, Hangzhou, China Pioneer Seminar Topic: Methodologies of Art History xi The Effect of Political and Cultural Ideas on Clothing Reform, Chinese Hair, and Clothing Fashion, 1890-1910's (History) . 271 Author: Yanyu Zhong School: Shenzhen Middle School, Shenzhen, China Pioneer Seminar Topic: Qing China and the West: Conflict and Cultural Exchange The Effect of Viewing Psychopathic Characters on Television on the Development of Psychopathic Traits on Children (Psychology) . 283 Author: Selin Baydar School: Hisar School, Istanbul, Turkey Pioneer Seminar Topic: Clinical Psychology The Impact of Emotions, Ambiguity, and Apathy on Decision-Making in Individuals with Alzheimer's Disease: A Proposal to Facilitate the Diagnosis of Alzheimer's Disease (Neuroscience) . 299 Author: Sammer M. Marzouk School: The University of Chicago Laboratory Schools, Chicago, Illinois, USA Pioneer Seminar Topic: The Decision-Making Brain The Neural Mechanism, Genetic Basis and Possible Treatment of Procrastination (Neuroscience) . 321 Author: Yuyang Sun School: Shenzhen Middle School, Shenzhen, China Pioneer Seminar Topic: The Decision-Making Brain The Power and Significance of Agency in The Iliad (Literature) . 333 Author: Yumeng Li School: Beijing National Day School, Beijing, China Pioneer Seminar Topic: The Hero in Literature and Culture The Existence of a Knight’s Tour on the Surface of Rectangular Boxes (Mathematics) . * Author: Shengwei Lu School: Hwa Chong Institution, Republic of Singapore Pioneer Seminar Topic: Combinatorics and Graph Theory * Shengwei Lu has elected to forego publication of his paper in The Pioneer Research Journal, Volume 4, at this time because his paper is under consideration for publication in another research journal. xii The Pioneer Research Journal 1 Are Hedge Funds a Veblen Good? Georgia McKirgan Author Background: Georgia McKirgan grew up in the United Kingdom and currently attends The Portsmouth Grammar School in Portsmouth, UK. Her Pioneer seminar topic was in the field of economics and titled "Financial Market Behavior and Misbehavior." 1. Introduction Hedge funds have grown to be an important part of the investment universe. Initially they promised outperformance over traditional funds, which was used to justify their high fees. As the hedge fund industry has grown, performance has deteriorated but assets under management have continued to grow. In economics, a ‘normal’ good is one where demand decreases as the price increases. The Financial Times lexicon defines a ‘veblen’ good as “a luxury item whose price does not follow the usual laws of supply and demand. Usually, the higher the price of a particular good the less people will want it. For luxury goods, such as very expensive wines, watches or cars, however, the item becomes more desirable as it grows more expensive and less desirable should it drop in price.” hedge funds are the highest-priced investment funds in the market. Does growing demand for hedge funds as an asset class and the preference of investors for higher-fee funds suggest that hedge funds are veblen goods or are the high fees justified by superior investment performance? To answer this question, I analyze the development and growth of the hedge fund industry and try to understand the reasons investors choose this kind of asset over other assets. I then use data from one of the leading databases of hedge fund performance, EurekaHedge, to test a number of hypotheses relating to the decision by institutional investors to invest in hedge funds. I then conclude that while movements in other financial markets have been the main driver of hedge fund asset growth, investors have still tended to favor higher-priced hedge funds over cheaper alternatives, suggesting that to some extent, hedge funds are ‘veblen’ goods. A hedge fund is a largely unregulated investment pool that is distinguished by a number of characteristics. Firstly, as the name suggests, the fund is supposed to be ‘hedged’ against general market risk. This distinguishes them from more general ‘long only’ mutual funds or passive funds (also known as Trackers or ETFs) the value of which generally track the performance of the market in which they are invested. The manager of a regular mutual fund benchmarks his or her performance against a relevant market index. For equity funds, this is likely to be a broad market index like the S&P 500, Dow Jones Industrial, Russell 2000 or FTSE100. The manager’s job is to use his or her investment skill to outperform the market. If the market is up 10% over a certain period and the fund is up 12%, the manager will be deemed to have performed well. Similarly, if the market is down 10% and the fund is down 8%, the investors in the fund will have lost money, but the manager will be deemed to have performed well. The assumption is that by putting money in this fund, the investor is happy to assume the market risk and is 2 The Pioneer Research Journal paying the manager to improve upon this market performance. Typical mutual fund fees will be 1-1.5% per year (100-150 basis points)