Cross-industry information sharing among colleagues and analyst research
| Authors | Huang, Lin, Zang |
| Journal | Journal of Accounting and Economics |
| Year | 2022 |
| Type | Published Paper |
| Abstract | We identify a specific organizational resource in brokerage houses--information sharing among analyst colleagues who cover economically related industries along a supply chain. After controlling for brokerage selection effects, we show evidence consistent with the benefit of this resource to analyst research performance. Specifically, we find that analysts whose colleagues cover more economically connected industries have better research performance, especially when their colleagues produce higher-quality research. We further show that colleagues' coverage of downstream (upstream) industries is positively related to the accuracy of only analysts' revenue (expense) forecasts and that analysts and their highly connected colleagues tend to issue earnings forecast revisions contemporaneously. Last, we find that analysts with economically connected colleagues tend to have a higher level of industry specialization. Overall, our findings suggest that analysts rely on organizational resources to produce high-quality research. Hence, a portion of their performance and reputation is not transferable across employers. |
| Keywords | Financial analyst, information sharing, economically connected industries, supply chain, analyst performance, industry specialization |
| URL | https://www.sciencedirect.com/science/article/pii/S0165410122000192 |
| Tags | Archival Empirical | Manager / Firm Behavior |
Can FinTech competition improve sell-side research quality?
| Authors | Jame, Markov, Wolfe |
| Journal | The Accounting Review |
| Year | 2022 |
| Type | Published Paper |
| Abstract | We examine how increased competition stemming from an innovation in financial technology influences sell-side analyst research quality. We find that firms added to Estimize, an open platform that crowdsources short-term earnings forecasts, experience a pervasive and substantial reduction in consensus bias and a limited increase in consensus accuracy relative to matched control firms. Long-term forecasts and investment recommendations remain similarly biased, alleviating the concern that the documented reduction in bias is a response to broad economic forces. At the individual analyst level, we find that bias reduction is more pronounced among close-to-management analysts, and that more biased analysts respond by reducing their coverage of Estimize firms. The collective evidence suggests that competition from Estimize improves sell-side research quality by discouraging strategic bias. |
| Keywords | Analysts, forecast bias, FinTech, crowdsourcing |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2915817 |
| Tags | Archival Empirical | Manager / Firm Behavior |
Media partisanship and fundamental corporate decisions
| Authors | Knill, Liu, McConnell |
| Journal | Journal of Financial and Quantitative Analysis |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Using the introduction of Fox News as a natural experiment, we investigate whether partisanship in television news coverage influences fundamental corporate decisions.We find that during the George W. Bush presidency, firms led by Republican-leaning managers headquartered in regions into which Fox was introduced shift upward their total investment expenditures and financial leverage. Our findings imply that in making fundamental corporate decisions, Republican-leaning managers are swayed by the Republican slant of Fox that presents an optimistic macroeconomic outlook. The results highlight the importance of heterogeneity in media slant in understanding the role of the media incorporate decision making. |
| Keywords | Media slant, partisanship, corporate decision-making |
| URL | https://www.cambridge.org/core/journals/journal-of-financial-and-quantitative-analysis/article/abs/media-partisanship-and-fundamental-corporate-decisions/0E3A5D1C6B5BC003B839D0E161AAE22D#access-block |
| Tags | Archival Empirical | Experimental / Survey-Based Empirical | Manager / Firm Behavior | Media and Textual Analysis |
Clients' connections: Measuring the role of private information in decentralized markets
| Authors | Kondor, Pinter |
| Journal | Journal of Finance |
| Year | 2022 |
| Type | Published Paper |
| Abstract | We propose a new measure of private information in decentralized markets-connections-which exploits the time variation in the number of dealers with whom a client trades in a time period. Using trade-level data for the U.K. government bond market, we show that clients perform better when having more connections as their trades predict future price movements. Time variation in market-wide connections also helps explain yield dynamics. Given our novel measure, we present two applications suggesting that (i) dealers pass on information, acquired from their informed clients, to their affiliates, and (ii) informed clients better predict the orderflow intermediated by their dealers. |
| URL | https://onlinelibrary.wiley.com/doi/ftr/10.1111/jofi.13087 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency |
Social proximity to capital: Implications for investors and firms
| Authors | Kuchler, Li, Peng, Stroebel, Zhou |
| Journal | The Review of Financial Studies |
| Year | 2022 |
| Type | Published Paper |
| Abstract | We show that institutional investors are more likely to invest in firms from regions to which they have stronger social ties but find no evidence that these investments earn a differential return. Firms in regions with stronger social ties to locations with many institutional investors have higher valuations and liquidity. These effects are largest for small firms with little analyst coverage, suggesting that the investors' behavior is explained by their increased awareness of firms in socially proximate locations. Our results highlight that the social structure of regions affects firms' access to capital and contributes to geographic differences in economic outcomes. |
| URL | https://academic.oup.com/rfs/article-abstract/35/6/2743/6372708?redirectedFrom=fulltext |
| Tags | Archival Empirical | Investment Decisions (Institutional) | Social Network Structure |
Social learning and analyst behavior
| Authors | Kumar, Rantala, Xu |
| Journal | Journal of Financial Economics |
| Year | 2022 |
| Type | Published Paper |
| Abstract | This study examines whether sell-side equity analysts engage in "social learning" in which their earnings forecasts for certain firms are influenced by the forecasts and outcomes of "peer" analysts associated with other firms in their respective portfolios. We find that analyst optimism is negatively correlated with recent forecast errors, by peers, on other firms in the analyst's portfolio. An analyst is also more likely to issue "bold" forecasts when peers recently issued similar forecasts for other portfolio firms. Analysts learn more from peers with similar personal characteristics. Overall, social learning benefits analysts and improves their forecast accuracy. |
| Keywords | Sell-side equity analysts, social learning, bold forecasts, forecast accuracy |
| URL | https://doi.org/10.1016/j.jfineco.2021.06.011 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Productivity Spillovers | Social Network Structure |
The power of profanity: The meaning and impact of swear words in word of mouth
| Authors | Lafreniere, Moore, Fisher |
| Journal | Journal of Marketing Research |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Swearing can violate norms and thereby offend consumers. Yet the prevalence of swear word use suggests that an offensiveness perspective may not fully capture their impact in marketing. This article adopts a linguistic perspective to develop and test a model of how, why, and when swear word use affects consumers in online word of mouth. In two field data sets and four experiments, the authors show that relative to reviews with no swear words, or with non-swear-word synonyms (e.g., super), reviews with swear words (e.g., damn) impact review readers. First, reviews with swear words are rated as more helpful. Second, when a swear word qualifies a desirable [undesirable] product attribute, readers' attitudes toward the product increase [decrease] (e.g., "This dishwasher is damn quiet [loud]!"). Swear words impact readers because they convey meaning about (1) the reviewer and (2) the topic (product) under discussion. These two meanings function as independent, parallel mediators that drive the observed effects. Further, these effects are moderated by swear word number and style: they do not emerge when a review contains many swear words and are stronger for uncensored and euphemistic swear words (e.g., darn) than censored swear words (e.g., d*mn). Overall, swear words in reviews provide value to readers-and review platforms-because they efficiently and effectively convey two meanings. |
| URL | https://journals.sagepub.com/doi/full/10.1177/00222437221078606 |
| Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical |
Shall we talk? The role of interactive investor platforms in corporate communication
| Authors | Lee, Zhong |
| Journal | Journal of Accounting and Economics |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Between 2010 and 2017, Chinese investors used an investor interactive platform (IIP) to ask public companies around 2.5 million questions, the vast majority of which received a reply within two weeks. We analyze these IIP dialogues using a BERT-based algorithm and provide preliminary evidence on their causes and consequences. Our analyses show most questions reflect investors' difficulties in processing information already in the public domain. Controlling for other news, higher IIP activity is associated with increases in trading volume, return volatility, market liquidity, and price informativeness as well as decreases in bid-ask spread. Financial statement-related postings increase around the adoption of new accounting standards. Collectively, our results show that investors face significant information processing costs but that IIP activities help reduce these costs, leading to improvements in stock price formation. |
| Keywords | Corporate disclosure, investor relations, information processing costs, interactive communication, market liquidity, price informativeness |
| URL | https://www.sciencedirect.com/science/article/pii/S0165410122000477 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Manager / Firm Behavior |
A framework for analyzing influencer marketing in social networks: Selection and scheduling of influencers
| Authors | Mallipeddi, Kumar, Sriskandarajah, Zhu |
| Journal | Management Science |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Explosive growth in the number of users on various social media platforms has transformed the way firms strategize their marketing activities. To take advantage of the vast size of social networks, firms have now turned their attention to influencer marketing wherein they employ independent influencers to promote their products on social media platforms. Despite the recent growth in influencer marketing, the problem of network seeding (i.e., identification of influencers to optimally post a firm's message or advertisement) neither has been rigorously studied in the academic literature nor has been carefully addressed in practice. We develop a data-driven optimization framework to help a firm successfully conduct (i) short-horizon and (ii) long-horizon influencer marketing campaigns, for which two models are developed, respectively, to maximize the firm's benefit. The models are based on the interactions with marketers, observation of firms' message placements on social media, and model parameters estimated via empirical analysis performed on data from Twitter. Our empirical analysis discovers the effects of collective influence of multiple influencers and finds two important parameters to be included in the models, namely, multiple exposure effect and forgetting effect. For the short-horizon campaign, we develop an optimization model to select influencers and present structural properties for the model. Using these properties, we develop a mathematical programming based polynomial time procedure to provide near-optimal solutions. For the long-horizon problem, we develop an efficient solution procedure to simultaneously select influencers and schedule their message postings over a planning horizon. We demonstrate the superiority of our solution strategies for both short- and long-horizon problems against multiple benchmark methods used in practice. Finally, we present several managerially relevant insights for firms in the influencer marketing context. |
| URL | https://pubsonline.informs.org/doi/epdf/10.1287/mnsc.2020.3899 |
| Tags | Archival Empirical | Manager / Firm Behavior | Theory |
Game on: Social networks and markets
| Authors | Pedersen |
| Journal | Journal of Financial Economics |
| Year | 2022 |
| Type | Published Paper |
| Abstract | I present closed-form solutions for prices, portfolios, and beliefs in a model where four types of investors trade assets over time: naive investors who learn via a social network, "fanatics" possibly spreading fake news, and rational short- and long-term investors. I show that fanatic and rational views dominate over time, and their relative importance depends on their following by influencers. Securities markets exhibit social network spillovers, large effects of influencers and thought leaders, bubbles, bursts of high volume, price momentum, fundamental momentum, and reversal. The model sheds new light on the GameStop event, historical bubbles, and asset markets more generally. |
| Keywords | Networks influencers, social media, bubbles, asset prices, belief formation, momentum, reversal |
| URL | https://www.sciencedirect.com/science/article/pii/S0304405X22000964 |
| Tags | Asset Pricing, Trading Volume and Market Efficiency | Financing- and Investment Decisions (Individual) | Investment Decisions (Institutional) | Theory |
Influencing social media influencers through affiliation
| Authors | Pei, Mayzlin |
| Journal | Marketing Science |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Social media influencers are category enthusiasts who often post product recommendations. Firms sometimes pay influencers to skew their product reviews in favor of the firm. We ask the following research questions. First, what is the optimal level of affiliation (if any) from the firm's perspective? Affiliation introduces positive bias to the influencer's review but also decreases the persuasiveness of the review. Second, because affiliated reviews are often biased in favor of the firm, what is the impact of affiliation on consumer welfare? We find that the affiliation decision depends on the cost of information acquisition, the consumer's prior and awareness, and the disclosure regime. When the consumer's prior belief is low, the firm needs to affiliate less closely or not at all in order to preserve the influencer's persuasiveness, the change in the consumer's belief following the influencer's review. In contrast, when the consumer's prior belief is high, the firm fully affiliates with the influencer to both maximize awareness and prevent a negative review. We also show that the firm's involvement can be Pareto improving if the information acquisition cost is relatively high, and a partial disclosure rule may increase consumer welfare. |
| URL | https://pubsonline.informs.org/doi/abs/10.1287/mksc.2021.1322 |
| Tags | Archival Empirical | Manager / Firm Behavior |
The effects of consumer preference and peer influence on trial of an experience good
| Authors | Pyo, Lee, Park |
| Journal | Journal of Marketing Research |
| Year | 2022 |
| Type | Published Paper |
| Abstract | This research examines the interaction effect of two dimensions of preference on social contagion: preference similarity between a consumer (i.e., who seeks recommendation) and a peer (i.e., who potentially provides recommendation) and the fit of an experience good with the consumer's preference. For empirical analyses, the authors collected rich information from Last.fm, a music social networking website, including individual users' music play histories, friendship information, social tags (i.e., user-generated keywords associated with artists and songs), and new song profiles. The results show that consumers' trial of a song that fits less with their preference is influenced more by peers with similar preferences. By contrast, consumers' trial of a song that fits more with their preference is influenced more by peers with dissimilar preferences. This research enriches the understanding of the nuanced role of preference in social contagion and offers managerial implications to better leverage social dynamics. |
| URL | https://journals.sagepub.com/doi/abs/10.1177/00222437221093603 |
| Tags | Archival Empirical | Consumer Decisions |
Let me show you what I did versus what I have: Sharing experiential versus material purchases alters authenticity and liking of social media users
| Authors | Valsesia, Diehl |
| Journal | Journal of Consumer Research |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Social media may encourage novel ways of signaling that involve different purchase types (experiential vs. material), signaling frequencies (multiple vs. single signals), and other features unique to social media (e.g., hashtags). This work examines how purchase signals are received on social media and how these signaling variations affect signal receivers' perceptions of the authenticity of social media posts as well as the overall impressions receivers form of the signal sender. Data collected across six experiments show multiple material purchase signals lead to more negative impressions compared to multiple experiential purchase signals. Signal receivers perceive multiple material purchase posts as less authentic, which dampens their impressions of the signal sender. In line with this mechanism, the impression premium of experiential purchase signals disappears when receivers use other cues (monetary mentions, other users' comments, and marketer associations via hashtags) to infer a signal's lack of authenticity. Additional data also document downstream consequences on engagement. This work contributes theoretically to research in both signaling and social media and improves the understanding of substantive situations in which consumers' objectives of curating a positive image and creating engagement with their posts, collide with marketers' objectives of encouraging user-generated content and word of mouth. |
| Keywords | Signaling, social media, impression management, word of mouth, engagement, influencer |
| URL | https://academic.oup.com/jcr/article-abstract/49/3/430/6444995?redirectedFrom=fulltext |
| Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical | Theory |
Entrepreneurial spillovers across coworkers
| Authors | Wallskog |
| Journal | Review of Financial Studies |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Using large-scale administrative data, I track the employment and entrepreneurship of over forty million Americans and investigate entrepreneurial spillovers across coworkers, based on the idea that individuals who start their own firms learn institutional knowledge and entrepreneurial skills that they may teach others. I find that an individual whose current coworkers have more prior entrepreneurship experience is more likely to become an entrepreneur themself within the next five years, and these spillovers are strongest among workers with similar jobs and demographics. Furthermore, an individual is more likely to become a successful entrepreneur if those coworkers were themselves successful entrepreneurs. To quantify the role of these spillovers, I build a structural model of entrepreneurship and learning and estimate that the aggregate entrepreneurship rate would be 10% lower in the absence of learning. |
| Keywords | Spillovers, peer effect, entrepreneurship, social learning |
| URL | https://melaniewallskog.github.io/files/wallskog_jmp.pdf |
| Tags | Archival Empirical | Experimental / Survey-Based Empirical | Productivity Spillovers | Social Network Structure |
Down a rabbit hole: How prior media consumption shapes subsequent media consumption
| Authors | Woolley, Sharif |
| Journal | Journal of Marketing Research |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Consumers often become "stuck in a rabbit hole" when consuming media. They may watch several YouTube videos in the same category or view several thematically similar artistic images on Instagram in a row, finding it difficult to stop. What causes individuals to choose to consume additional media on a topic that is similar to (vs. different from) what they just experienced? The authors examine a novel antecedent: the consecutive consumption of multiple similar media. After viewing multiple similar media consecutively, more consumers choose to (1) view additional similar media over dissimilar media or (2) complete a dissimilar activity entirely, even when the prior consumption pattern is externally induced. The rabbit hole effect occurs because of increased accessibility of the shared category: when a category is more accessible, people feel immersed in it and anticipate that future options within that category will be more enjoyable. The authors identify three characteristics of media consumption that contribute to the rabbit hole effect by increasing category accessibility: similarity, repetition, and consecutiveness of prior media consumption. This research contributes to literature on technology, choice, and variety seeking, and it offers implications for increasing (vs. slowing) similar consumption. |
| URL | https://journals.sagepub.com/doi/abs/10.1177/00222437211055403 |
| Tags | Archival Empirical | Consumer Decisions |
Customer review provision policies with heterogeneous cluster preferences
| Authors | Xiao, Chen, Tang |
| Journal | Management Science |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Companies often post user-generated reviews online so that potential buyers in different clusters (age, geographic region, occupation, etc.) can learn from existing customers about the quality of an experience good and cluster preferences before purchasing. In this paper, we evaluate two common user-generated review provision policies for selling experience goods to customers in different clusters with heterogeneous preferences. The first policy is called the association-based policy (AP) under which a customer in a cluster can only observe the aggregate review (i.e., average rating) generated by users within the same cluster. The second policy is called the global-based policy (GP) under which each customer is presented with the aggregate review generated by all users across clusters. We find that, in general, the firm benefits from a policy that provides a larger number of "relevant reviews" to customers. When customers are more certain about the product quality and when clusters are more diverse, AP is more profitable than GP because it provides cluster-specific reviews to customers. Otherwise, GP is more profitable as it provides a larger number of less relevant reviews. Moreover, we propose a third provision policy that imparts the union of the information by AP and GP and show that it is more profitable for the firm. Although the third policy always renders a higher consumer welfare than GP, it may generate a lower consumer welfare than AP. |
| URL | https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2021.4138 |
| Tags | Archival Empirical | Manager / Firm Behavior |
How much is financial advice worth? The transparency-revenue tension in social trading
| Authors | Yang, Zheng, Mookerjee |
| Journal | Management Science |
| Year | 2022 |
| Type | Published Paper |
| Abstract | In social trading, less experienced investors (followers) are allowed to copy the trades of experts (traders) in real time after paying a fee. Such a copy-trading mechanism often runs into a transparency-revenue tension. On the one hand, social trading platforms need to release traders' trades as transparently as possible to allow followers to evaluate traders accurately. On the other hand, complete transparency may undercut the platform's revenue because followers can free ride. That is, followers can manually copy the trades of a trader to avoid paying the following fees. This study addresses this critical tension by optimizing the level of transparency through delaying the release of trading information pertaining to the trades executed by traders. We capture the economic impact of the delay using the notions of profit-gap and delayed-profit. We propose a mechanism that elucidates the economic effects of the profit-gap and delayed-profit on followers and, consequently, the amount of money following a trader: protection effect and evaluation effect. Empirical investigations find support for these two effects. We then develop a stochastic control formulation that optimizes platform revenue, where the control is the optimal delay customized at the trader level and calculated as a function of the current amount of money following a trader and the number of views on the trader's profile page. The optimized revenue can be incorporated into an algorithm to provide a systematic way to infuse the platform's goals into the ranking of the traders. A counterfactual study is conducted to demonstrate the performance of the optimal delay policy (versus a constant-delay policy) using data from a leading social trading platform operating in the foreign exchange market. |
| URL | https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2021.4147 |
| Tags | Archival Empirical | Manager / Firm Behavior |
Tweets we like aren't alike: Time of day affects engagement with vice and virtue tweets
| Authors | Zor, Kim, Monga |
| Journal | Journal of Consumer Research |
| Year | 2022 |
| Type | Published Paper |
| Abstract | Consumers are increasingly engaging with content on social media platforms, such as by "following" Twitter accounts and "liking" tweets. How does their engagement change through the day for vice content offering immediate gratification versus virtue content offering long-term knowledge benefits? Examining when (morning vs. evening) engagement happens with which content (vice vs. virtue), the current research reveals a time-of-day asymmetry. As morning turns to evening, engagement shifts away from virtue and toward vice content. This asymmetry is documented in three studies using actual Twitter data-millions of data points collected every 30 minutes over long periods of time-and one study using an experimental setting. Consistent with a process of self-control failure, one of the Twitter data studies shows a theory-driven moderation of the asymmetry, and the experiment shows mediation via self-control. However, multiple processes are likely at play, as time does not unfold in isolation during a day, but co-occurs with the unfolding of multiple events. These results provide new insights into social media engagement and guide practitioners on when to post which content. |
| Keywords | Time of day, vice, virtue, content engagement, self-control failure, Twitter |
| URL | https://academic.oup.com/jcr/article-abstract/49/3/473/6463636?redirectedFrom=fulltext |
| Tags | Archival Empirical | Consumer Decisions |
Social finance as cultural evolution, transmission bias, and market dynamics
| Authors | Akcay, Hirshleifer |
| Journal | Proceedings of the National Academy of Sciences |
| Year | 2021 |
| Type | Published Paper | Literature Review Paper |
| Abstract | The thoughts and behaviors of financial market participants depend upon adopted cultural traits, including information signals, beliefs, strategies, and folk economic models. Financial traits compete to survive in the human population and are modified in the process of being transmitted from one agent to another. These cultural evolutionary processes shape market outcomes, which in turn feed back into the success of competing traits. This evolutionary system is studied in an emerging paradigm, social finance. In this paradigm, social transmission biases determine the evolution of financial traits in the investor population. It considers an enriched set of cultural traits, both selection on traits and mutation pressure, and market equilibrium at different frequencies. Other key ingredients of the paradigm include psychological bias, social network structure, information asymmetries, and institutional environment. |
| Keywords | Evolutionary finance, cultural evolution, social interaction, behavioral economics, social finance |
| URL | https://www.pnas.org/doi/10.1073/pnas.2015568118 |
| Tags | Asset Pricing, Trading Volume and Market Efficiency | Consumer Decisions | Evolutionary Finance | Financing- and Investment Decisions (Individual) | Propagation of Noise / Undesirable Outcomes | Social Network Structure | Social Transmission Biases | Theory |
Do individual investors trade on investment-related Internet postings?
| Authors | Ammann, Schaub |
| Journal | Management Science |
| Year | 2021 |
| Type | Published Paper |
| Abstract | Many people share investment ideas online. This study investigates whether individual investors trade on investment-related internet postings. We use unique data from a social trading platform that allow us to observe the shared portfolios of traders, their posted comments, and the replicating transactions of followers. We find robust evidence that followers increasingly replicate shared portfolios of traders after the posting of comments. However, postings do not help followers identify portfolios that deliver superior performance in the future. In a cross-sectional analysis, we show that it is mainly followers typically considered to be unsophisticated who trade after comment postings. |
| Keywords | Internet postings, individual investors, trading behavior, social trading, FinTech |
| URL | https://pubsonline.informs.org/doi/10.1287/mnsc.2020.3733 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Experimental / Survey-Based Empirical | Financing- and Investment Decisions (Individual) |