Learning from the crowd: Regression discontinuity estimates of the effects of an online review database
| Authors | Anderson, Magruder |
| Journal | Economic Journal |
| Year | 2012 |
| Type | Published Paper |
| Abstract | Internet review forums increasingly supplement expert opinion and social networks in informing consumers about product quality. However, limited empirical evidence links digital word-of-mouth to purchasing decisions. We implement a regression discontinuity design to estimate the effect of positive Yelp.com ratings on restaurant reservation availability. An extra half-star rating causes restaurants to sell out 19 percentage points (49%) more frequently, with larger impacts when alternate information is more scarce. These returns suggest that restaurateurs face incentives to leave fake reviews but a rich set of robustness checks confirm that restaurants do not manipulate ratings in a confounding, discontinuous manner. |
| Keywords | Sports events, media, Olympics, Olympic stocks, retail investors, valuation, fundamentals, comovement, categorization, investor sentiment, investor recognition, common factor, stay-at-home, meme |
| URL | https://doi.org/10.1111/j.1468-0297.2012.02512.x |
| Tags | Archival Empirical | Consumer Decisions | Manager / Firm Behavior | Media and Textual Analysis |
On braggarts and gossips: A self-enhancement account of word-of-mouth generation and transmission
| Authors | Angelis, Bonezzi, Peluso, Rucker, Costabile |
| Journal | Journal of Marketing Research |
| Year | 2012 |
| Type | Published Paper |
| Abstract | Previous research on word of mouth (WOM) has presented inconsistent evidence on whether consumers are more inclined to share positive or negative information about products and services. Some findings suggest that consumers are more inclined to engage in positive WOM, whereas others suggest that consumers are more inclined to engage in negative WOM. The present research offers a theoretical perspective that provides a means to resolve these seemingly contradictory findings. Specifically, the authors compare the generation of WOM (i.e., consumers sharing information about their own experiences) with the transmission of WOM (i.e., consumers passing on information about experiences they heard occurred to others). They suggest that a basic human motive to self-enhance leads consumers to generate positive WOM (i.e., share information about their own positive consumption experiences) but transmit negative WOM (i.e., pass on information they heard about others' negative consumption experiences). The authors present evidence for self-enhancement motives playing out in opposite ways for WOM generation versus WOM transmission across four experiments. |
| Keywords | Word-of-mouth valence, word-of-mouth generation, word-of-mouth transmission, self-enhancement |
| URL | https://doi.org/10.1509/jmr.11.0136 |
| Tags | Experimental / Survey-Based Empirical | Social Transmission Biases |
What makes online content viral?
| Authors | Berger, Milkman |
| Journal | Journal of Marketing Research |
| Year | 2012 |
| Type | Published Paper |
| Abstract | Why are certain pieces of online content (e.g., advertisements, videos, news articles) more viral than others? This article takes a psychological approach to understanding diffusion. Using a unique data set of all the New York Times articles published over a three-month period, the authors examine how emotion shapes virality. The results indicate that positive content is more viral than negative content, but the relationship between emotion and social transmission is more complex than valence alone. Virality is partially driven by physiological arousal. Content that evokes high-arousal positive (awe) or negative (anger or anxiety) emotions is more viral. Content that evokes low-arousal, or deactivating, emotions (e.g., sadness) is less viral. These results hold even when the authors control for how surprising, interesting, or practically useful content is (all of which are positively linked to virality), as well as external drivers of attention (e.g., how prominently content was featured). Experimental results further demonstrate the causal impact of specific emotion on transmission and illustrate that it is driven by the level of activation induced. Taken together, these findings shed light on why people share content and how to design more effective viral marketing campaigns. |
| Keywords | Word of mouth, viral marketing, social transmission, online content |
| URL | https://doi.org/10.1509/jmr.10.0353 |
| Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical | Media and Textual Analysis | Social Transmission Biases |
Friends with money
| Authors | Engelberg, Gao, Parsons |
| Journal | Journal of Financial Economics |
| Year | 2012 |
| Type | Published Paper |
| Abstract | When banks and firms are connected through interpersonal linkages - such as their respective management having attended college or previously worked together - interest rates are markedly reduced, comparable with single shifts in credit ratings. These rate concessions do not appear to reflect sweetheart deals. Subsequent firm performance, such as future credit ratings or stock returns, improves following a connected deal, suggesting that social networks lead to either better information flow or better monitoring. |
| Keywords | Asymmetric information, bank lending, cost of debt, social connections, lending outcomes |
| URL | https://doi.org/10.1016/j.jfineco.2011.08.003 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Investment Decisions (Institutional) | Manager / Firm Behavior | Social Network Structure |
Getting the word out: Neural correlates of enthusiastic message propagation
| Authors | Falk, Donnell, Lieberman |
| Journal | Frontiers in Human Neuroscience |
| Year | 2012 |
| Type | Published Paper |
| Abstract | What happens in the mind of a person who first hears a potentially exciting idea? We examined the neural precursors of spreading ideas with enthusiasm, and dissected enthusiasm into component processes that can be identified through automated linguistic analysis, gestalt human ratings of combined linguistic and nonverbal cues, and points of convergence/divergence between the two. We combined tools from natural language processing (NLP) with data gathered using fMRI to link the neurocognitive mechanisms that are set in motion during initial exposure to ideas and subsequent behaviors of these message communicators outside of the scanner. Participants' neural activity was recorded as they reviewed ideas for potential television show pilots. Participants' language from video-taped interviews collected post-scan was transcribed and given to an automated linguistic sentiment analysis (SA) classifier, which returned ratings for evaluative language (evaluative vs. descriptive) and valence (positive vs. negative). Separately, human coders rated the enthusiasm with which participants transmitted each idea. More positive sentiment ratings by the automated classifier were associated with activation in neural regions including medial prefrontal cortex; MPFC, precuneus/ posterior cingulate cortex; PC/PCC, and medial temporal lobe; MTL. More evaluative, positive, descriptions were associated exclusively with neural activity in temporal-parietal junction (TPJ). Finally, human ratings indicative of more enthusiastic sentiment were associated with activation across these regions (MPFC, PC/PCC, DMPFC, TPJ, and MTL) as well as in ventral striatum (VS), inferior parietal lobule and premotor cortex. Taken together, these data demonstrate novel links between neural activity during initial idea encoding and the enthusiasm with which the ideas are subsequently delivered. This research lays the groundwork to use machine learning and neuroimaging data to study word of mouth communication and the spread of ideas in both traditional and new media environments. |
| Keywords | fMRI, sentiment analysis, natural language processing, information diffusion, word-of-mouth |
| URL | https://doi.org/10.3389/fnhum.2012.00313 |
| Tags | Experimental / Survey-Based Empirical | Social Transmission Biases |
When social networking is not working: Individuals with low self-esteem recognize but do not reap the benefits of self-disclosure on facebook
| Authors | Forest, Wood |
| Journal | Psychological Science |
| Year | 2012 |
| Type | Published Paper |
| Abstract | The popular media have publicized the idea that social networking Web sites (e.g., Facebook) may enrich the interpersonal lives of people who struggle to make social connections. The opportunity that such sites provide for self-disclosure-a necessary component in the development of intimacy-could be especially beneficial for people with low self-esteem, who are normally hesitant to self-disclose and who have difficulty maintaining satisfying relationships. We suspected that posting on Facebook would reduce the perceived riskiness of self-disclosure, thus encouraging people with low self-esteem to express themselves more openly. In three studies, we examined whether such individuals see Facebook as a safe and appealing medium for self-disclosure, and whether their actual Facebook posts enabled them to reap social rewards. We found that although people with low self-esteem considered Facebook an appealing venue for self-disclosure, the low positivity and high negativity of their disclosures elicited undesirable responses from other people. |
| Keywords | Social networking, facebook, self-esteem, self-disclosure, interpersonal relationships, social interaction |
| URL | https://doi.org/10.1177/0956797611429709 |
| Tags | Experimental / Survey-Based Empirical | Media and Textual Analysis |
Designing ranking systems for hotels on travel search engines by mining user-generated and crowd sourced content
| Authors | Ghose, Ipeirotis, Li |
| Journal | Marketing Science |
| Year | 2012 |
| Type | Published Paper |
| Abstract | User-generated content on social media platforms and product search engines is changing the way consumers shop for goods online. However, current product search engines fail to effectively leverage information created across diverse social media platforms. Moreover, current ranking algorithms in these product search engines tend to induce consumers to focus on one single product characteristic dimension (e.g., price, star rating). This approach largely ignores consumers' multidimensional preferences for products. In this paper, we propose to generate a ranking system that recommends products that provide, on average, the best value for the consumer's money. The key idea is that products that provide a higher surplus should be ranked higher on the screen in response to consumer queries. We use a unique data set of U.S. hotel reservations made over a three-month period through Travelocity, which we supplement with data from various social media sources using techniques from text mining, image classification, social geotagging, human annotations, and geomapping. We propose a random coefficient hybrid structural model, taking into consideration the two sources of consumer heterogeneity the different travel occasions and different hotel characteristics introduce. Based on the estimates from the model, we infer the economic impact of various location and service characteristics of hotels. We then propose a new hotel ranking system based on the average utility gain a consumer receives from staying in a particular hotel. By doing so, we can provide customers with the "best-value" hotels early on. Our user studies, using ranking comparisons from several thousand users, validate the superiority of our ranking system relative to existing systems on several travel search engines. On a broader note, this paper illustrates how social media can be mined and incorporated into a demand estimation model in order to generate a new ranking system in product search engines. We thus highlight the tight linkages between user behavior on social media and search engines. Our interdisciplinary approach provides several insights for using machine learning techniques in economics and marketing research. |
| Keywords | Gender, conference calls, textual analysis, euphemisms, abnormal returns |
| URL | https://doi.org/10.1287/mksc.1110.0700 |
| Tags | Archival Empirical | Media and Textual Analysis |
Peer performance and stock market entry
| Authors | Kaustia, Knupfer |
| Journal | Journal of Financial Economics |
| Year | 2012 |
| Type | Published Paper |
| Abstract | Peer performance can influence the adoption of financial innovations and investment styles. We present evidence of this type of social influence: recent stock returns that local peers experience affect an individual's stock market entry decision, particularly in areas with better opportunities for social learning. The likelihood of entry does not decrease as returns fall below zero, consistent with people not talking about decisions that have produced inferior outcomes. Market returns, media coverage, local stocks, omitted local variables, short sales constraints, and stock purchases within households do not seem to explain these results. |
| Keywords | Investor behavior, peer effect, social interaction, social influence, stock market participation |
| URL | https://doi.org/10.1016/j.jfineco.2011.01.010 |
| Tags | Archival Empirical | Financing- and Investment Decisions (Individual) | Social Transmission Biases |
Do internet stock message boards influence trading? Evidence from heavily discussed stocks with no fundamental news
| Authors | Sabherwal, Sarkar, Zhang |
| Journal | Journal of Business Finance & Accounting |
| Year | 2012 |
| Type | Published Paper |
| Abstract | This study extends the literature on the information content of stock message boards. To better understand the effect of online postings on trading activities and reduce the error due to stocks with small message board followings, we examine stocks with no fundamental news and high message posting activity. Such stocks tend to be of small firms with weak financials. For those stocks, we find a two-day pump followed by a two-day dump manipulation pattern among online traders, which suggests that an online stock message board can be used as a herding device to temporarily drive up stock prices. We also find that online traders' credit-weighted sentiment index, but not the number of postings, is positively associated with contemporaneous return and negatively predicts the return next day and two days later. Also, absolute sentiment is negatively related with contemporaneous and next day's intraday volatility and positively related with the proportion of volume in small-sized trades. We conclude that message board sentiment is an important predictor of trading-related activities. |
| Keywords | Internet stock message board, online trading, investor sentiment, noise trader, naive bayesian, text classifier |
| URL | https://onlinelibrary.wiley.com/doi/full/10.1111/j.1468-5957.2011.02258.x |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Financing- and Investment Decisions (Individual) | Media and Textual Analysis |
The effects of traditional and social earned media on sales: A study of a microlending marketplace
| Authors | Stephan, Galak |
| Journal | Journal of Marketing Research |
| Year | 2012 |
| Type | Published Paper |
| Abstract | Marketers distinguish three types of media: paid (e.g., advertising), owned (e.g., company website), and earned (e.g., publicity). The effects of paid media on sales have been extensively covered in the marketing literature. The effects of earned media, however, have received limited attention. The authors examine how two types of earned media, traditional (e.g., publicity and press mentions) and social (e.g., blog and online community posts), affect sales and activity in each other. They analyze 14 months of daily sales and media activity data from a microlending marketplace website using a multivariate autoregressive time-series model. They find that (1) both traditional and social earned media affect sales; (2) the per-event sales impact of traditional earned media activity is larger than for social earned media; (3) because of the greater frequency of social earned media activity, after adjusting for event frequency, social earned media's sales elasticity is significantly greater than traditional earned media's; and (4) social earned media appears to play an important role in driving traditional earned media activity. |
| Keywords | Social media, short selling, intraday trading, retail investors |
| URL | https://www.jstor.org/stable/41714453 |
| Tags | Archival Empirical | Financing- and Investment Decisions (Individual) | Media and Textual Analysis |
The institutional legacy of the Ottoman Empire: Islamic rule and financial development in South Eastern Europe
| Authors | Grosjean |
| Journal | Journal of Comparative Economics |
| Year | 2011 |
| Type | Published Paper |
| Abstract | This paper uses a historical experiment - the occupation of South Eastern Europe by the Ottoman Empire - to shed light on the persistence of financial development. Interest-lending prohibition persisted under Islamic rule much longer than in the rest of Europe. The unique history and political fragmentation of the region allows investigating within-country effects, in six countries that were formerly only partly occupied by the Ottoman Empire. Former Islamic rule is consistently associated with lower contemporaneous formal financial development, both across and within countries. It is associated with a decrease in bank penetration by 10% across countries and 4% within countries. However, within country, the effect of the Ottoman Empire is confined to financial development. There is no association between former Ottoman rule, income, small and medium sized enterprise development or entrepreneurship. The effect is robust to controlling for a wide number of observable characteristics. Moreover, localities with Armenian, Jewish or Greek minorities, who were allowed to practice interest lending under Ottoman rule, have higher levels of bank penetration. By contrast, Islamic religion and trust in the financial system play no role in explaining such long-term persistence. |
| Keywords | Banking penetration, institutional persistence, Islamic finance, Ottoman Empire |
| URL | https://www.sciencedirect.com/science/article/pii/S0147596710000405 |
| Tags | Archival Empirical | Experimental / Survey-Based Empirical |
Opinion leadership and social contagion in new product diffusion
| Authors | Iyengar, Bulte, Valente |
| Journal | Marketing Science |
| Year | 2011 |
| Type | Published Paper |
| Abstract | We study how opinion leadership and social contagion within social networks affect the adoption of a new product. In contrast to earlier studies, we find evidence of contagion operating over network ties, even after controlling for marketing effort and arbitrary systemwide changes. More importantly, we also find that the amount of contagion is moderated by both the recipients' perception of their opinion leadership and the sources' volume of product usage. The other key finding is that sociometric and self-reported measures of leadership are weakly correlated and associated with different kinds of adoption-related behaviors, which suggests that they probably capture different constructs. We discuss the implications of these novel findings for diffusion theory and research and for marketing practice. |
| Keywords | Superstition, insurance, rural household |
| URL | https://doi.org/10.1287/mksc.1100.0566 |
| Tags | Archival Empirical | Consumer Decisions | Social Network Structure |
Religious beliefs, gambling attitudes, and financial market outcomes
| Authors | Kumar, Page, Spalt |
| Journal | Journal of Financial Economics |
| Year | 2011 |
| Type | Published Paper |
| Abstract | This study investigates whether geographic variation in religion-induced gambling norms affects aggregate market outcomes. We conjecture that gambling propensity would be stronger in regions with higher concentrations of Catholics relative to Protestants. Consistent with our conjecture, we show that in regions with higher Catholic-Protestant ratios, investors exhibit a stronger propensity to hold lottery-type stocks, broad-based employee stock option plans are more popular, the initial day return following an initial public offering is higher, and the magnitude of the negative lottery-stock premium is larger. Collectively, these results indicate that religion-induced gambling attitudes impact investors' portfolio choices, corporate decisions, and stock returns. |
| Keywords | Gambling, religion, institutional investors, employee stock option plans, IPOs |
| URL | https://doi.org/10.1016/j.jfineco.2011.07.001 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Financing- and Investment Decisions (Individual) | Manager / Firm Behavior |
So you want to run an experiment, now what? Some simple rules of thumb for optimal experimental design
| Authors | List, Sadoff, Wagner |
| Journal | Experimental Economics |
| Year | 2011 |
| Type | Published Paper |
| Abstract | Experimental economics represents a strong growth industry. In the past several decades the method has expanded beyond intellectual curiosity, now meriting consideration alongside the other more traditional empirical approaches used in economics. Accompanying this growth is an influx of new experimenters who are in need of straightforward direction to make their designs more powerful. This study provides several simple rules of thumb that researchers can apply to improve the efficiency of their experimental designs. We buttress these points by including empirical examples from the literature. |
| Keywords | Experimental economics, experimental design, rule of thumb, randomization techniques, optimal sample arrangement |
| URL | https://link.springer.com/article/10.1007/s10683-011-9275-7 |
| Tags | Experimental / Survey-Based Empirical | Theory |
Social learning and peer effects in consumption: Evidence from movie sales
| Authors | Moretti |
| Journal | Review of Economic Studies |
| Year | 2011 |
| Type | Published Paper |
| Abstract | Using box-office data for all movies released between 1982 and 2000, I quantify how much the consumption decisions of individuals depend on information they receive from their peers, when quality is ex ante uncertain. In the presence of social learning, we should see different box-office sales dynamics depending on whether opening weekend demand is higher or lower than expected. I use a unique feature of the movie industry to identify ex ante demand expectations: the number of screens dedicated to a movie in its opening weekend reflects the sales expectations held by profit-maximizing theatre owners. Several pieces of evidence are consistent with social learning. First, sales of movies with positive surprise and negative surprise in opening weekend demand diverge over time. If a movie has better than expected appeal and therefore experiences larger than expected sales in Week 1, consumers in Week 2 update upward their expectations of quality, further increasing Week 2 sales. Second, this divergence is small for movies for which consumers have strong priors and large for movies for which consumers have weak priors. Third, the effect of a surprise is stronger for audiences with large social networks. Finally, consumers do not respond to surprises in first-week sales that are orthogonal to movie quality, like weather shocks. Overall, social learning appears to be an important determinant of sales in the movie industry, accounting for 32% of sales for the typical movie with positive surprise. This implies the existence of a large "social multiplier" such that the elasticity of aggregate demand to movie quality is larger than the elasticity of individual demand. |
| Keywords | Financial market, investors' behavior, household finance, monetary policy, personal savings, post-pandemic, emotional communities, wallstreetbets, attention-induced trading, gamification |
| URL | https://doi.org/10.1093/restud/rdq014 |
| Tags | Archival Empirical | Consumer Decisions |
A dynamic model of the effect of online communications on firm sales
| Authors | Sonnier, McAlister, Rutz |
| Journal | Marketing Science |
| Year | 2011 |
| Type | Published Paper |
| Abstract | Interpersonal communications have long been recognized as an influential source of information for consumers. Internet-based media have facilitated information exchange among firms and consumers, as well as observability and measurement of such exchanges. However, much of the research addressing online communication focuses on ratings collected from online forums. In this paper, we look beyond ratings to a more comprehensive view of online communications. We consider the sales effect of the volume of positive, negative, and neutral online communications captured by Web crawler technology and classified by automated sentiment analysis. Our modeling approach captures two key features of our data, dynamics and endogeneity. In terms of dynamics, we model daily measures of online communications about a firm and its products as contributing to a latent demand-generating stock variable. To account for the endogeneity, we extend the latent instrumental variable technique to account for dynamic endogenous regressors. Our results demonstrate a significant effect of positive, negative, and neutral online communications on daily sales performance. Failure to account for endogeneity results in a severe attenuation of the estimated effects. From a managerial perspective, we demonstrate the importance of accounting for communication valence as well as the impact of shocks to positive, negative, and neutral online communications. |
| Keywords | Tweet, social media marketing, social media return on investment, field experiment, television |
| URL | https://doi.org/10.1287/mksc.1110.0642 |
| Tags | Archival Empirical | Consumer Decisions | Media and Textual Analysis |
Superstar extinction
| Authors | Azoulay, Graff Zivin, Wang |
| Journal | Quarterly Journal of Economics |
| Year | 2010 |
| Type | Published Paper |
| Abstract | We estimate the magnitude of spillovers generated by 112 academic "superstars" who died prematurely and unexpectedly, thus providing an exogenous source of variation in the structure of their collaborators' coauthorship networks. Following the death of a superstar, we find that collaborators experience, on average, a lasting 5% to 8% decline in their quality-adjusted publication rates. By exploring interactions of the treatment effect with a variety of star, coauthor, and star/coauthor characteristics, we seek to adjudicate between plausible mechanisms that might explain this finding. Taken together, our results suggest that spillovers are circumscribed in idea space, but less so in physical or social space. In particular, superstar extinction reveals the boundaries of the scientific field to which the star contributes-the "invisible college". |
| URL | https://doi.org/10.1162/qjec.2010.125.2.549 |
| Tags | Archival Empirical | Productivity Spillovers |
Nature or nurture: What determines investor behavior?
| Authors | Barnea, Cronqvist, Siegel |
| Journal | Journal of Financial Economics |
| Year | 2010 |
| Type | Published Paper |
| Abstract | Using data on identical and fraternal twins' complete financial portfolios, we decompose the cross-sectional variation in investor behavior. We find that a genetic factor explains about one-third of the variance in stock market participation and asset allocation. Family environment has an effect on the behavior of young individuals, but this effect is not long-lasting and disappears as an individual gains experience. Frequent contact among twins results in similar investment behavior beyond a genetic factor. Twins who grew up in different environments still display similar investment behavior. Our interpretation of a genetic component of the decision to invest in the stock market is that there are innate differences in factors affecting effective stock market participation costs. We attribute the genetic component of asset allocation-the relative amount invested in equities and the portfolio volatility-to genetic variation in risk preferences. |
| Keywords | Portfolio choice, investor heterogeneity, behavioral genetics |
| URL | https://www.sciencedirect.com/science/article/pii/S0304405X10001777 |
| Tags | Archival Empirical | Evolutionary Finance | Financing- and Investment Decisions (Individual) | Social Network Structure |
Individualism and momentum around the world
| Authors | Chui, Titman, Wei |
| Journal | Journal of Finance |
| Year | 2010 |
| Type | Published Paper |
| Abstract | This paper examines how cultural differences influence the returns of momentum strategies. Cross-country cultural differences are measured with an individualism index developed by Hofstede (2001), which is related to overconfidence and self-attribution bias. We find that individualism is positively associated with trading volume and volatility, as well as to the magnitude of momentum profits. Momentum profits are also positively related to analyst forecast dispersion, transaction costs, and the familiarity of the market to foreigners, and negatively related to firm size and volatility. However, the addition of these and other variables does not dampen the relation between individualism and momentum profits. |
| Keywords | Cultural differences, momentum strategy, asset pricing, behavioral finance |
| URL | https://onlinelibrary.wiley.com/doi/full/10.1111/j.1540-6261.2009.01532.x |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Financing- and Investment Decisions (Individual) | Investment Decisions (Institutional) |
Who's posting facebook faux pas? A cross-cultural examination of personality differences
| Authors | Karl, Peluchette, Schlaegel |
| Journal | International Journal of Selection and Assessment |
| Year | 2010 |
| Type | Published Paper |
| Abstract | This study examines culture and personality differences in student reports of the likelihood that they would post various types of information on their Facebook profiles. As predicted those high on conscientiousness, agreeableness, and emotional stability proved significantly less likely to report posting problematic content (e.g., substance abuse, sexual content) on their profile. Those who scored high on Compulsive Internet Use indicated a greater likelihood to post such profile information. Consistent with our expectations, our cross-cultural analysis revealed that US students were more inclined than German students to post problematic information to their Facebook site. Implications of these results and recommendations for future research are discussed. |
| URL | https://doi.org/10.1111/j.1468-2389.2010.00499.x |
| Tags | Experimental / Survey-Based Empirical | Media and Textual Analysis |