The impact of joint versus separate prediction mode on forecasting accuracy
| Authors | Imas, Jung, Saccardo, Vosgerau |
| Year | 2022 |
| Type | Working Paper |
| Abstract | Forecasters predicting how people change their behavior in response to a treatment or intervention often consider a set of alternatives. In contrast, those who are treated are typically exposed to only one of the treatment alternatives. For example, managers selecting a wage schedule consider a set of alternative wages while employees are hired at a given rate. We show that forecasts made in joint-prediction mode - which considers a set of alternatives -generate predictions that expect substantially larger behavioral responses than those made in separate-prediction mode - which considers the response to only one treatment realization in isolation. Results show the latter to be more accurate in matching people's actual responses to interventions and treatment changes. We present applications to managerial decision-making and forecasting of scientific results. |
| Keywords | Forecasting accuracy, joint vs. separate evaluation, behavioral economics |
| URL | https://www.nber.org/papers/w30611?utm_campaign=ntwh&utm_medium=email&utm_source=ntwg4 |
| Tags | Experimental / Survey-Based 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 |
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 |
The long-lasting effects of living under communism on attitudes towards financial markets
| Authors | Laudenbach, Malmendier, Niessen-Ruenzi |
| Year | 2022 |
| Type | Working Paper |
| Abstract | We analyze the long-term effects of living under communism and its anticapitalist doctrine on households' financial investment decisions and attitudes towards financial markets. Utilizing comprehensive German brokerage data and bank data, we show that, decades after Reunification, East Germans still invest significantly less in the stock market than West Germans. Consistent with communist friends-and-foes propaganda, East Germans are more likely to hold stocks of companies from communist countries (China, Russia, Vietnam) and of state-owned companies, and are unlikely to invest in American companies and the financial industry. Effects are stronger for individuals exposed to "positive emotional tagging", e. g., those living in celebrated showcase cities. Effects reverse for individuals with negative experiences, e.g., environmental pollution, religious oppression, or lack of (Western) TV entertainment. Election years trigger further divergence of East and West Germans. We provide evidence of negative welfare consequences due to less diversified portfolios, higher-fee products, and lower risk-adjusted returns. |
| Keywords | Capital markets, communism, memory, emotional tagging, stock-market participation |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3526926 |
| Tags | Archival Empirical | Experimental / Survey-Based Empirical | Financing- and Investment Decisions (Individual) |
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 |
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) |
Listening in on investors' thoughts and conversations
| Authors | Chen, Hwang |
| Journal | Journal of Financial Economics |
| Year | 2021 |
| Type | Published Paper |
| Abstract | A large literature in neuroscience and social psychology shows that humans are wired to be meticulous about how they are perceived by others. In this paper, we propose that impression management considerations can also end up guiding the content that investors transmit via word of mouth and inadvertently lead to the propagation of noise. We analyze server log data from one of the largest investment-related websites in the United States. Consistent with our proposition, we find that investors more frequently share articles that are more suitable for impression management despite such articles less accurately predicting returns. Additional analyses suggest that high levels of sharing can lead to overpricing. |
| Keywords | Social interactions, Social transmission bias, Asset prices |
| URL | https://www.sciencedirect.com/science/article/abs/pii/S0304405X21003810 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Experimental / Survey-Based Empirical | Financing- and Investment Decisions (Individual) | Media and Textual Analysis | Propagation of Noise / Undesirable Outcomes | Social Transmission Biases |
Media persuasion and consumption: Evidence from the Dave Ramsey Show
| Authors | Chopra |
| Year | 2021 |
| Type | Working Paper |
| Abstract | Can entertaining mass media programs influence individual consumption and savings decisions? I study this question by examining the impact of the Dave Ramsey Show, an iconic US radio talk show which encourages people to spend less and save more. To that end, I combine household-level expenditure records from a large scanner panel with fine-grained information about the geographic coverage of the radio show over time. Exploiting the quasi-natural experiment created by the staggered expansion of the radio show from 2004 to 2019, I find that exposure to the radio show decreases monthly household expenditures. This effect is driven by households with initially high expenditures relative to their income. In a mechanism experiment, I document that listening to the radio show has a persistent effect on people's attitudes towards consumption and debt. This suggests that attitudinal changes are a key mechanism driving behavioral change. My findings highlight the potential of entertaining mass media programs for interventions aimed at changing people's financial decisions. |
| Keywords | Consumption, debt, entertainment, edutainment, household finance, mass media, persuasion, radio, savings |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3992358 |
| Tags | Archival Empirical | Consumer Decisions | Experimental / Survey-Based Empirical | Financing- and Investment Decisions (Individual) |
Tesla: is now the time to invest? An examination of Tesla, social media, and its effect on stock
| Authors | Coiro |
| Year | 2021 |
| Type | Working Paper |
| Abstract | Tesla is an American electric vehicle and clean energy company. They are based in Palo Alto, California and their product base consists of electric cars, battery energy storage, solar panels, and solar roof tiles. On an average day in 2021, Tesla stock sells for $700/share. We will review historical Tesla data and examine whether this particular stock is worth the investment? In addition to historical data, this research reviews the effect of traditional news and social media on human behavior. Exploring social media analytics, investor sentiment and behavior in hopes to gauge how these factors can impact Tesla and whether this should be taken into consideration prior to the investment. |
| Keywords | Tesla, Stock Market, Investment, Social Media, Investor, Human Behavior, Clean Energy, Solar, Electric Cars |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3908275&dgcid=ejournal_htmlemail_capital:markets:market:efficiency:ejournal_abstractlink |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Experimental / Survey-Based Empirical | Financing- and Investment Decisions (Individual) | Media and Textual Analysis |
Social networks and market reactions to earnings news
| Authors | Hirshleifer, Peng, Wang |
| Year | 2021 |
| Type | Working Paper |
| Abstract | Using social network data from Facebook, we show that earnings announcements made by firms located in counties with higher investor social network centrality attract more attention from both retail and institutional investors. For such firms, the immediate price and volume reactions to earnings announcements are stronger, and post-announcement drift is weaker. Such firms have lower post-announcement persistence of return volatility but higher persistence in investor attention and trading volume. These effects are stronger for small firms, firms with poor analyst and media coverage, and for stocks with salient returns. Our evidence suggests a dual role of social networks-they facilitate the incorporation of public information into prices, but also trigger persistent excessive trading. |
| Keywords | Social networks, investor attention, earnings announcement, information diffusion, disagreement |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3824022 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Experimental / Survey-Based Empirical | Financing- and Investment Decisions (Individual) | Investment Decisions (Institutional) | Media and Textual Analysis | Propagation of Noise / Undesirable Outcomes | Social Network Structure |
The salience of entrepreneurship: Evidence from online business
| Authors | Huang, Lin, Liu, Manso |
| Year | 2021 |
| Type | Working Paper |
| Abstract | We study the psychological bias underlying the decision to become an entrepreneur in the online business context. Using entrepreneurs affiliated with Taobao Marketplace, the worldâÂÂs largest online shopping platform, as our sample, we find that people who observe the emergence of successful stores in their neighborhood are more likely to become online entrepreneurs. Relying on the Taobao store rating system and detailed geographical information for identification, we find that in rural areas of China, an increase in the online rating (upgrade event) of a store leads to a significant increase in the number of new stores within a 0.5-km radius. This effect increases with the magnitude of the upgrade event, decreases with physical distance from the focal store and is robust to a wide range of rigorous model specifications. However, such decisions to enter the market may be suboptimal, as entrants whose entrepreneurs are motivated by these upgrade events underperform relative to their peers in terms of sales and have a higher probability of market exit. Overall, our results are most consistent with salience theories of choice and cannot be explained by regional development or rational learning. |
| Keywords | Entrepreneurship, peer effect, salience theory, availability heuristic |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3843524 |
| Tags | Archival Empirical | Experimental / Survey-Based Empirical | Propagation of Noise / Undesirable Outcomes | Social Network Structure |
Partisan professionals: Evidence from credit rating analysts
| Authors | Kempf, Tsoutsoura |
| Journal | Journal of Finance |
| Year | 2021 |
| Type | Published Paper |
| Abstract | Partisan perception affects the actions of professionals in the financial sector. Linking credit rating analysts to party affiliations from voter records, we show that analysts not affiliated with the U.S. president's party downward-adjust corporate credit ratings more frequently. Since we compare analysts with different party affiliations covering the same firm in the same quarter, differences in firm fundamentals cannot explain the results. We also find a sharp divergence in the rating actions of Democratic and Republican analysts around the 2016 presidential election. Our results show that analysts' partisan perception has price effects and may influence firms' investment policies. |
| Keywords | Analysts, credit ratings, partisanship, polarization, belief disagreement, Trump, elections |
| URL | https://doi.org/10.1111/jofi.13083 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Experimental / Survey-Based Empirical |
The trading response of individual investors to local bankruptcies
| Authors | Laudenbach, Loos, Pirschel, Wohlfart |
| Journal | Journal of Financial Economics |
| Year | 2021 |
| Type | Published Paper |
| Abstract | We examine how adverse local experiences that are uninformative of future returns affect households' investment behavior in the short term. Using data from a German online brokerage and a survey we show that retail investors sharply reduce risk taking in response to nearby firm bankruptcies. Adjustments in risk taking occur through immediate and transitory increases in trading, and seem to work through more pessimistic expectations about aggregate stock returns and increased risk aversion. Changes in background risks or wealth effects cannot explain our findings. Extrapolation from local experiences to aggregate expectations is inconsistent with optimal use of full or limited information. |
| Keywords | Individual investors, risk-taking, trading, experiences |
| URL | https://doi.org/10.1016/j.jfineco.2021.06.033 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Experimental / Survey-Based Empirical | Financing- and Investment Decisions (Individual) |
Superstition and farmers' life insurance spending
| Authors | Liu, Zhang, Chen, Yang |
| Journal | Economics Letters |
| Year | 2021 |
| Type | Published Paper |
| Abstract | Superstition is prevalent in rural areas, yet very few studies examine whether it affects rural households' economic decisions. In this paper, we investigate the impact of "zodiac year" superstition on Chinese rural households' life insurance spending. We find a statistically significant 18.5% increase in life insurance expenditure during the head's zodiac year. Such a boost is only significant in the zodiac year and does not exist in non-zodiac years. Our study provides novel evidence that rural households would hedge "bad luck" by self-insurance when bearing superstitious beliefs. |
| Keywords | Superstition, insurance, rural household |
| URL | https://doi.org/10.1016/j.econlet.2021.109975 |
| Tags | Archival Empirical | Experimental / Survey-Based Empirical | Financing- and Investment Decisions (Individual) |
Social ties and peer effects in crowdfunding markets
| Authors | Peng, Zhang |
| Year | 2021 |
| Type | Working Paper |
| Abstract | We identify the crucial role social networks play in crowdfunding markets. Investors are 50% more likely to fund projects that their social network peers support and are 11.2% more likely to fund projects from regions to which they have strong social ties, given a one standard deviation change in the variables. Peer effects complement platform design choices and the effect of social ties, and social ties transmit information about economic conditions in project locations. Further, the investor-level effects aggregate and affect project funding successes. Our findings suggest that social networks increase investor awareness, disseminate information, and have real impacts on capital allocations. |
| Keywords | Social network, peer effects, social learning, fintech, crowdfunding, platform design |
| URL | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3747375 |
| Tags | Archival Empirical | Experimental / Survey-Based Empirical | Financing- and Investment Decisions (Individual) | Social Network Structure |
The neuroscience of persuasion and information propagation: the key role of the mentalizing system
| Authors | Baek, Scholz, Falk |
| Book | Handbook of Communication Science and Biology |
| Year | 2020 |
| Type | Book |
| Abstract | What are the psychological and neural processes that support successful information propagation between communicators and receivers? The current chapter draws upon recent contributions from neuroscience to focus on the role of mentalizing, or considering other people's mental states, as one factor that leads to successful social influence and information propagation. Across different contexts, messages that lead to information propagation are distinguished by higher levels of mentalizing in both communicators and receivers of influence. The chapter also highlights developmental, cultural, and social network factors that moderate the relationship between mentalizing and influence. |
| URL | https://www.taylorfrancis.com/chapters/edit/10.4324/9781351235587-12/neuroscience-persuasion-information-propagation-elisa-baek-christin-scholz-emily-falk |
| Tags | Experimental / Survey-Based Empirical | Social Transmission Biases |
Harnessing the wisdom of crowds
| Authors | Da, Huang |
| Journal | Management Science |
| Year | 2020 |
| Type | Published Paper |
| Abstract | When will a large group provide an accurate answer to a question involving quantity estimation? We empirically examine this question on a crowd-based corporate earnings forecast platform (Estimize.com). By tracking user activities, we monitor the amount of public information a user views before making an earnings forecast. We find that the more public information users view, the less weight they put on their own private information. Although this improves the accuracy of individual forecasts, it reduces the accuracy of the group consensus forecast because useful private information is prevented from entering the consensus. To address endogeneity concerns related to a user's information acquisition choice, we collaborate with Estimize.com to run experiments that restrict the information available to randomly selected stocks and users. The experiments confirm that "independent" forecasts result in a more accurate consensus. Estimize.com was convinced to switch to a "blind" platform from November 2015 on. The findings suggest that the wisdom of crowds can be better harnessed by encouraging independent voices from among group members and that more public information disclosure may not always improve group decision making. |
| Keywords | Wisdom of crowds, herding, naive learning, social learning, group decision making, earnings forecast |
| URL | https://pubsonline.informs.org/doi/10.1287/mnsc.2019.3294 |
| Tags | Archival Empirical | Asset Pricing, Trading Volume and Market Efficiency | Experimental / Survey-Based Empirical | Financing- and Investment Decisions (Individual) | Social Network Structure |
What you see is all there is
| Authors | Enke |
| Journal | Quarterly Journal of Economics |
| Year | 2020 |
| Type | Published Paper |
| Abstract | News reports and communication are inherently constrained by space, time, and attention. As a result, news sources often condition the decision of whether to share a piece of information on the similarity between the signal and the prior belief of the audience, which generates a sample selection problem. This article experimentally studies how people form beliefs in these contexts, in particular the mechanisms behind errors in statistical reasoning. I document that a substantial fraction of experimental participants follows a simple "what you see is all there is" heuristic, according to which participants exclusively consider information that is right in front of them, and directly use the sample mean to estimate the population mean. A series of treatments aimed at identifying mechanisms suggests that for many participants, unobserved signals do not even come to mind. I provide causal evidence that the frequency of such incorrect mental models is a function of the computational complexity of the decision problem. These results point to the context dependence of what comes to mind and the resulting errors in belief updating. |
| Keywords | Bounded rationality, mental models, complexity, beliefs |
| URL | https://doi.org/10.1093/qje/qjaa012 |
| Tags | Experimental / Survey-Based Empirical | Social Transmission Biases |
To be or not to be your authentic self? Catering to others' preferences hinders performance
| Authors | Gino, Sezer, Huanga |
| Journal | Organizational Behavior and Human Decision Processes |
| Year | 2020 |
| Type | Published Paper |
| Abstract | When approaching interpersonal first meetings (e.g., job interviews), people often cater to the target's interests and expectations to make a good impression and secure a positive outcome such as being offered the job (pilot study). This strategy is distinct from other approaches identified in prior impression management research (Studies 1A, 1B and 1C), and does not produce the benefits people expect. In a field study in which entrepreneurs pitched their ideas to potential investors (Study 2), catering harmed investors' evaluations, while being authentic improved them. People experience greater anxiety and instrumentality when they cater to another person's preferences than when they behave authentically (Studies 3A and 3B). Compared to behaving authentically or to a control condition, catering harms performance because trying to anticipate and fulfill others' preferences feels instrumental and increases anxiety (Studies 4 and 5). Taken together, these results suggest that although people believe using catering in interpersonal first meetings will lead to successful outcomes, the opposite is true: catering creates undesirable feelings of instrumentality for the caterer, increases anxiety, and ultimately hinders performance. |
| Keywords | Authenticity, catering, honesty, selection, anxiety, impression management |
| URL | https://doi.org/10.1016/j.obhdp.2020.01.003 |
| Tags | Experimental / Survey-Based Empirical | Investment Decisions (Institutional) | Manager / Firm Behavior | Social Transmission Biases |