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Why do people risk exposure to Ponzi schemes? Econometric evidence from Jamaica

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  • Tennant, David

Abstract

The global financial crisis has led to the unearthing of numerous Ponzi schemes around the world. This paper examines the factors determining individuals' extent of exposure to Ponzi schemes. The theoretical literature on investor gullibility and risk tolerance was used to develop an economic model to explain such exposure. The model was empirically tested by analyzing the results of a survey of 402 investors in Jamaican Ponzi schemes. A profile of persons most likely to be highly exposed to Ponzi schemes was created, along with a delineation of the most critical factors accounting for the popularity of such schemes.

Suggested Citation

  • Tennant, David, 2011. "Why do people risk exposure to Ponzi schemes? Econometric evidence from Jamaica," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(3), pages 328-346, July.
  • Handle: RePEc:eee:intfin:v:21:y:2011:i:3:p:328-346
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    References listed on IDEAS

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    3. Chris Jarvis, 2000. "The Rise and Fall of the Pyramid Schemes in Albania," IMF Staff Papers, Palgrave Macmillan, vol. 47(1), pages 1-1.
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    6. Ana Carvajal & Hunter K. Monroe & Catherine A Pattillo & Brian Wynter, 2009. "Ponzi Schemes in the Caribbean," IMF Working Papers 09/95, International Monetary Fund.
    7. Jacqueline M. Drew & Michael E. Drew, 2010. "The Identification of Ponzi Schemes: Can a Picture Tell a Thousand Frauds?," Discussion Papers in Finance finance:201008, Griffith University, Department of Accounting, Finance and Economics.
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    Cited by:

    1. Marc Hofstetter & Daniel Mejía & José Nicolás Rosas & Miguel Urrutia, 2017. "Ponzi Schemes and the Financial Sector: DMG and DRFE in Colombia," DOCUMENTOS CEDE 015609, UNIVERSIDAD DE LOS ANDES-CEDE.

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