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) |
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. Crossâcountry cultural differences are measured with an individualism index developed by Hofstede (2001), which is related to overconfidence and selfâattribution 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, stock return, behavioral finance |
| URL | https://doi.org/10.1111/j.1540-6261.2009.01532.x |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Financing- and Investment Decisions (Individual) |
Asymmetric social iteractions in physician prescription behavior: The role of opinion leaders
| Authors | Nair, Manchanda, Bhatia |
| Journal | Journal of Marketing Research |
| Year | 2010 |
| Type | Published Paper |
| Abstract | The authors quantify the impact of social interactions and peer effects in the context of physicians' prescription choices. Using detailed individual-level prescription data, along with self-reported social network information, the authors document that physician prescription behavior is significantly influenced by the behavior of research-active specialists, or "opinion leaders," in the physician's reference group. The authors leverage a natural experiment in the category: New guidelines released about the therapeutic nature of the focal drug generated conditions in which physicians were more likely to be influenced by the behavior of specialist physicians in their network. The authors (1) find important, statistically significant peer effects that are robust across model specifications; (2) document asymmetries in response to marketing activity across nominators and opinion leaders; (3) measure the incremental value to firms of directing targeted sales force activity to these opinion leaders; and (4) present estimates of the social multiplier of detailing in this category. |
| Keywords | Experimental economics, bibliometrics, lab experiments, field experiments |
| URL | https://www.jstor.org/stable/20751550 |
| Tags | Archival Empirical | Consumer Decisions | Social Network Structure |
Workplace peers and entrepreneurship
| Authors | Nanda, Sorensen |
| Journal | Management Science |
| Year | 2010 |
| Type | Published Paper |
| Abstract | We examine whether the likelihood of entrepreneurial activity is related to the prior career experiences of an individual's coworkers, using a unique matched employer-employee panel data set. We argue that coworkers can increase the likelihood that an individual will perceive entrepreneurial opportunities as well as increase his or her motivation to pursue those opportunities. We find that an individual is more likely to become an entrepreneur if his or her coworkers have been entrepreneurs before. Peer influences also appear to be substitutes for other sources of entrepreneurial influence: we find that peer influences are strongest for those who have less exposure to entrepreneurship in other aspects |
| Keywords | Entrepreneurship, peers, organizational studies, personnel |
| URL | https://www.jstor.org/stable/40785246 |
| Tags | Archival Empirical | Manager / Firm Behavior |
Peer effects in the trading decisions of individual investors
| Authors | Ng, Wu |
| Journal | Financial Management |
| Year | 2010 |
| Type | Published Paper |
| Abstract | This study examines for evidence of peer effects in the trading decisions of individual investors from Mainland China, a country whose cultural and social structures are vastly different from those of Western countries. Cultural differences, as widely documented, play a significant role in social interactions and word-of-mouth behavior. In contrast to US studies, we find robust evidence that the trading decisions of Chinese investors are influenced, via word of mouth, by those of their peers who maintain brokerage accounts at the same branch, but not by those whose accounts are maintained at another branch located in the same city. |
| URL | https://doi.org/10.1111/j.1755-053X.2010.01093.x |
| Tags | Archival Empirical | Financing- and Investment Decisions (Individual) |
An epidemic model of investor behavior
| Authors | Shive |
| Journal | Journal of Financial and Quantitative Analysis |
| Year | 2010 |
| Type | Published Paper |
| Abstract | I test whether social influence affects individual investors' trading and stock returns. In each of the 20 most active stocks in Finland over 9 years, the number of owners in a municipality multiplied by the number of investors who do not own a stock, a measure of the rate of transmission of diseases and rumors through social contact, predicts individual investor trading. I control for known determinants of trade, including daily news, and show that competing explanations for the relation are unlikely. Socially motivated trades predict stock returns, and the effects are not reversed, suggesting that individuals share useful information. Individuals' susceptibility to social influence has declined during the period, but the opportunities for social influence have increased. |
| URL | https://doi.org/10.1017/S0022109009990470 |
| Tags | Archival Empirical | Financing- and Investment Decisions (Individual) |
Quality matters: The expulsion of professors and the consequences for PhD student outcomes in Nazi Germany
| Authors | Waldinger |
| Journal | Journal of Political Economy |
| Year | 2010 |
| Type | Published Paper |
| Abstract | I investigate the effect of faculty quality on PhD student outcomes. To address the endogeneity of faculty quality I use exogenous variation provided by the expulsion of mathematics professors in Nazi Germany. Faculty quality is a very important determinant of short- and long-run PhD student outcomes. A one-standard-deviation increase in faculty quality increases the probability of publishing the dissertation in a top journal by 13 percentage points, the probability of becoming a full professor by 10 percentage points, the probability of having positive lifetime citations by 16 percentage points, and the number of lifetime citations by 6.3. |
| URL | https://doi.org/10.1086/655976 |
| Tags | Archival Empirical | Productivity Spillovers |
Distinguishing influence-based contagion from homophily-driven diffusion in dynamic networks
| Authors | Aral, Muchnik, Sundararajan |
| Journal | Proceedings of the National Academy of Sciences |
| Year | 2009 |
| Type | Published Paper |
| Abstract | Node characteristics and behaviors are often correlated with the structure of social networks over time. While evidence of this type of assortative mixing and temporal clustering of behaviors among linked nodes is used to support claims of peer influence and social contagion in networks, homophily may also explain such evidence.Here we develop a dynamic matched sample estimation framework to distinguish influence and homophily effects in dynamic networks,and we apply this framework to a global instant messaging network of 27.4 million users, using data on the day-by-day adoption of a mobile service application and users' longitudinal behavioral, demo-graphic, and geographic data. We find that previous methods over-estimate peer influence in product adoption decisions in this network by 300-700%, and that homophily explains>50% of the perceived behavioral contagion. These findings and methods are essential to both our understanding of the mechanisms that drive contagions in networks and our knowledge of how to propagate or combat them in domains as diverse as epidemiology, marketing, development economics, and public health. |
| Keywords | dynamic matching estimation, peer influence, social networks, identification |
| URL | https://www.pnas.org/doi/abs/10.1073/pnas.0908800106 |
| Tags | Archival Empirical | Social Network Structure |
Social connections and incentives in the workplace: Evidence from personnel data
| Authors | Bandeira, Barankay, Rasul |
| Journal | Econometrica |
| Year | 2009 |
| Type | Published Paper |
| Abstract | We present evidence on the effect of social connections between workers and managers on productivity in the workplace. To evaluate whether the existence of social connections is beneficial to the firm's overall performance, we explore how the effects of social connections vary with the strength of managerial incentives and worker's ability. To do so, we combine panel data on individual worker's productivity from personnel records with a natural field experiment in which we engineered an exogenous change in managerial incentives, from fixed wages to bonuses based on the average productivity of the workers managed. We find that when managers are paid fixed wages, they favor workers to whom they are socially connected irrespective of the worker's ability, but when they are paid performance bonuses, they target their effort toward high ability workers irrespective of whether they are socially connected to them or not. Although social connections increase the performance of connected workers, we find that favoring connected workers is detrimental for the firm's overall performance. |
| URL | https://doi.org/10.3982/ECTA6496 |
| Tags | Archival Empirical | Manager / Firm Behavior | Productivity Spillovers |
Mutual fund attributes and investor behavior
| Authors | Bollen |
| Journal | Journal of Financial and Quantitative Analysis |
| Year | 2009 |
| Type | Published Paper |
| Abstract | I study the dynamics of investor cash flows in socially responsible mutual funds. Consistent with anecdotal evidence of loyalty, the monthly volatility of investor cash flows is lower in socially responsible funds than in conventional funds. I find strong evidence that cash flows into socially responsible funds are more sensitive to lagged positive returns than cash flows into conventional funds, and weaker evidence that cash outflows from socially responsible funds are less sensitive to lagged negative returns. These results indicate that investors derive utility from the socially responsible attribute, especially when returns are positive. |
| Keywords | Mutual fund, social responsibility, cash flow, investor behavior, investor utility |
| URL | https://doi.org/10.1017/S0022109000004142 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Financing- and Investment Decisions (Individual) | Investment Decisions (Institutional) |
Social interactions and entrepreneurial activity
| Authors | Giannetti, Simonov |
| Journal | Journal of Economics and Management Strategy |
| Year | 2009 |
| Type | Published Paper |
| Abstract | We show that individuals residing in highly entrepreneurial neighborhoods are more likely to become entrepreneurs and invest more into their own businesses, even though their entrepreneurial profits are lower and their alternative job opportunities more attractive. Our results suggest that peer effects create nonpecuniary benefits from entrepreneurial activity and play an important role in the decision to become an entrepreneur. Alternative explanations, such as entry costs, social learning, and informal credit markets, are not supported by the data. |
| Keywords | Social interaction, peer effects, entrepreneurial activity, entrepreneurs, spillovers |
| URL | https://doi.org/10.1111/j.1530-9134.2009.00226.x |
| Tags | Archival Empirical | Productivity Spillovers | Social Network Structure |
Social interactions and entrepreneurial activity
| Authors | Giannetti, Simonov |
| Journal | Journal of Economics and Management Strategy |
| Year | 2009 |
| Type | Published Paper |
| Abstract | We show that individuals residing in highly entrepreneurial neighborhoods are more likely to become entrepreneurs and invest more into their own businesses, even though their entrepreneurial profits are lower and their alternative job opportunities more attractive. Our results suggest that peer effects create nonpecuniary benefits from entrepreneurial activity and play an important role in the decision to become an entrepreneur. Alternative explanations, such as entry costs, social learning, and informal credit markets, are not supported by the data. |
| URL | https://doi.org/10.1111/j.1530-9134.2009.00226.x |
| Tags | Archival Empirical | Manager / Firm Behavior |
Teaching students and teaching each other: The importance of peer learning for teachers
| Authors | Jackson, Bruegman |
| Journal | American Economic Review |
| Year | 2009 |
| Type | Published Paper |
| Abstract | Using longitudinal elementary school teacher and student data, we document that students have larger test score gains when their teachers experience improvements in the observable characteristics of their colleagues. Using within-school and within-teacher variation, we show that a teacher's students have larger achievement gains in math and reading when she has more effective colleagues (based on estimated value-added from an out-of-sample pre-period). Spillovers are strongest for less experienced teachers and persist over time, and historical peer quality explains away about 20 percent of the own-teacher effect, results that suggest peer learning. |
| URL | https://www.aeaweb.org/articles?id=10.1257/app.1.4.85 |
| Tags | Archival Empirical | Productivity Spillovers |
Peers at work
| Authors | Mas, Moretti |
| Journal | American Economic Review |
| Year | 2009 |
| Type | Published Paper |
| Abstract | We study peer effects in the workplace. Specifically, we investigate whether, how, and why the productivity of a worker depends on the productivity of coworkers in the same team. Using high-frequency data on worker productivity from a large supermarket chain, we find strong evidence of positive productivity spillovers from the introduction of highly productive personnel into a shift. Worker effort is positively related to the productivity of workers who see him, but not workers who do not see him. Additionally, workers respond more to the presence of coworkers with whom they frequently interact. We conclude that social pressure can partially internalize free-riding externalities that are built into many workplaces. |
| URL | https://www.aeaweb.org/articles?id=10.1257/aer.99.1.112 |
| Tags | Archival Empirical | Productivity Spillovers |
Neighbors matter: Causal community effects and stock market participation
| Authors | Brown, Ivkovic, Smith, Weisbenner |
| Journal | Journal of Finance |
| Year | 2008 |
| Type | Published Paper |
| Abstract | This paper establishes a causal relation between an individual's decision whether to own stocks and average stock market participation of the individual's community. We instrument for the average ownership of an individual's community with lagged average ownership of the states in which one's nonnative neighbors were born. Combining this instrumental variables approach with controls for individual and community fixed effects, a broad set of time-varying individual and community controls, and state-year effects rules out alternative explanations. To further establish that word-of-mouth communication drives this causal effect, we show that the results are stronger in more sociable communities. |
| URL | https://doi.org/10.1111/j.1540-6261.2008.01364.x |
| Tags | Archival Empirical | Financing- and Investment Decisions (Individual) |
The small world of investing: Board connections and mutual fund returns
| Authors | Cohen, Frazzini, Malloy |
| Journal | Journal of Political Economy |
| Year | 2008 |
| Type | Published Paper |
| Abstract | This paper uses social networks to identify information transfer in security markets. We focus on connections between mutual fund managers and corporate board members via shared education networks. We find that portfolio managers place larger bets on connected firms and perform significantly better on these holdings relative to their nonconnected holdings. A replicating portfolio of connected stocks outperforms nonconnected stocks by up to 7.8 percent per year. Returns are concentrated around corporate news announcements, consistent with portfolio managers gaining an informational advantage through the education networks. Our results suggest that social networks may be important mechanisms for information flow into asset prices. |
| URL | https://doi.org/10.1086/592415 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Investment Decisions (Institutional) |
Information diffusion effects in individual investors' common stock purchases: Covet thy neighbors' investment choices
| Authors | Ivkovic, Weisbenner |
| Journal | Review of Financial Studies |
| Year | 2007 |
| Type | Published Paper |
| Abstract | We study the relation between households' stock purchases and stock purchases made by their neighbors. A ten percentage point increase in neighbors' purchases of stocks from an industry is associated with a two percentage point increase in households' own purchases of stocks from that industry. The effect is considerably larger for local stocks and among households in more social states. Controlling for area sociability, households' and neighbors' investment style preferences, and the industry composition of local firms, we attribute approximately one-quarter to one-half of the correlation between households' stock purchases and stock purchases made by their neighbors to word-of-mouth communication. |
| URL | https://doi.org/10.1093/revfin/hhm009 |
| Tags | Archival Empirical | Financing- and Investment Decisions (Individual) |