Cumulative Market Research Articles

An analysis of residential PV system price differences between the United States and Germany

Residential photovoltaic (PV) systems were twice as expensive in the United States as in Germany (median of $5.29/W vs. $2.59/W) in 2012. This price discrepancy stems primarily from differences in non-hardware or “soft” costs between the two countries, which can only in part be explained by differences in cumulative market size and associated learning. A survey of German PV installers was deployed to collect granular data on PV soft costs in Germany, and the results are compared to those of a similar survey of U.S. PV installers. Non-module hardware costs and all analyzed soft costs are lower in Germany, especially for customer acquisition, installation labor, and profit/overhead costs, but also for expenses related to permitting, interconnection, and inspection procedures. Additional costs occur in the United States due to state and local sales taxes, smaller average system sizes, and longer project-development times. To reduce the identified additional costs of residential PV systems, the United States could introduce policies that enable a robust and lasting market while minimizing market fragmentation. Regularly declining incentives offering a transparent and certain value proposition—combined with simple interconnection, permitting, and inspection requirements—might help accelerate PV cost reductions in the United States.

How Much Does the Stock Market Risk Decline with the Investment Horizon? A Cross-Country Comparison

We perform a cross-country comparison of stock market risk. Stock market risk is defined as the standard deviation of cumulative stock market returns. We model stock market returns in a VAR(1) system jointly with bond returns and a set of predictive variables. Our results provide evidence of a strong negative horizon effect for US stock market returns and a weak negative horizon effect for Germany and France. When an open economy VAR(1) is considered, we find that stock market risk increases for the United States and Germany, while the evidence for France is mixed.

Stock Market Returns to Financial Innovations Before and During the Financial Crisis in US and Europe

Prior studies have focused on innovations in various contexts but largely excluded financial innovations, despite their notable importance. Not surprisingly, financial innovations account for a substantial portion of world economies and the huge market capitalization of bank. Therefore, the authors focus on studying the type, success, and causes of success of financial innovations. Using an event study and financial expert ratings, this study analyzes the types of and payoffs to 428 financial innovations by 39 major banks in North America and Western Europe between 2001 and 2010. The results indicate that security and credit instruments constitute the most common financial innovations and insurance innovations are the least common, which vary substantially by economic cycles and location. The average cumulative abnormal stock market returns to a financial innovation are $146 million. They are twice as high in the United States as in Western Europe. Thus, the market considers financial innovations profitable, not harmful, despite their apparent responsibility for the financial crisis. Surprisingly, the cumulative abnormal stock market returns to financial innovations are higher in recessions than in expansions. The authors find that riskiness and radicalness of the innovation increases abnormal stock market returns while complexity decreases cumulative abnormal stock market returns. Two interaction effects stand out: Riskiness of financial innovations has higher cumulative abnormal stock market returns in the United States than in Western Europe. Radicalness has lower cumulative abnormal stock market returns in recessions than in expansions. The authors recommend that banks need to time their launch of radical financial innovations to coincide with periods of expansion rather than recessions.

Curcumin: an orally bioavailable blocker of TNF and other pro-inflammatory biomarkers.

TNFs are major mediators of inflammation and inflammation-related diseases, hence, the United States Food and Drug Administration (FDA) has approved the use of blockers of the cytokine, TNF-α, for the treatment of osteoarthritis, inflammatory bowel disease, psoriasis and ankylosis. These drugs include the chimeric TNF antibody (infliximab), humanized TNF-α antibody (Humira) and soluble TNF receptor-II (Enbrel) and are associated with a total cumulative market value of more than $20 billion a year. As well as being expensive ($15 000-20 000 per person per year), these drugs have to be injected and have enough adverse effects to be given a black label warning by the FDA. In the current report, we describe an alternative, curcumin (diferuloylmethane), a component of turmeric (Curcuma longa) that is very inexpensive, orally bioavailable and highly safe in humans, yet can block TNF-α action and production in in vitro models, in animal models and in humans. In addition, we provide evidence for curcumin's activities against all of the diseases for which TNF blockers are currently being used. Mechanisms by which curcumin inhibits the production and the cell signalling pathways activated by this cytokine are also discussed. With health-care costs and safety being major issues today, this golden spice may help provide the solution. This article is part of a themed section on Emerging Therapeutic Aspects in Oncology. To view the other articles in this section visit http://dx.doi.org/10.1111/bph.2013.169.issue-8.

Under pricing in initial public offering

This study examines the underpricing in initial public offering (IPO). In some years, the means of gross proceed and money left on the table of after-merging data exceed those of beforemerging data. The vast majority of IPO firms employed highly reputable underwriters (reputation between 6 and 9) during the period of 2000-2009. Average gross proceed is also much higher in IPO cases where the lead underwriter is reputable. Likewise, initial return and money left on the table are mostly and substantially higher for the case of reputable lead underwriter, thereby supporting the conjecture that IPO firms do prefer a reputable lead underwriter to get better analyst coverage although they have to sacrifice money left on the table. Financial firms that undergo IPO are also on average older. Results suggest that log of age and 36-month cumulative market geometric return positively and significantly affect the long-term performance of IPO securities.

Modeling the effects of variable external influences and demographic processes on innovation diffusion

In this paper, a nonlinear mathematical model for innovation diffusion is proposed and analyzed by considering the effects of variable external influences (cumulative marketing efforts) and human population (variable marketing potential) in a society. The change in the population density is caused by various demographic processes such as immigration, emigration, intrinsic growth rate, death rate, etc. Thus, the problem of innovation diffusion is governed by three dynamic variables, namely, non adopters’ density, adopters’ density and the cumulative density of external influences. The model is analyzed by using the stability theory of differential equations and computer simulation. The model analysis shows that the main effect of the increase in cumulative density of external influences is to make the adopter population density reach its equilibrium at a much faster rate. It further shows that the density of adopters’ population increases as the parameters related to increase in non adopters’ population density increase. The effects of various parameters in the model on the nature of existing single equilibrium have also been discussed by using numerical simulation. It is shown that parameters related to the growth of non adopters’ population density have stabilizing effects on the system.

Venture capital reputation and investment performance

I propose a new measure of venture capital (VC) firm reputation and analyze its performance implications on private companies. Controlling for portfolio company quality and other VC-specific factors including experience, connectedness, syndication, industry competition, exit conditions, and investment environment, I find companies backed by more reputable VCs by initial public offering (IPO) capitalization share (based on cumulative market capitalization of IPOs backed by the VC), are more likely to exit successfully, access public markets faster, and have higher asset productivity at IPOs. Further tests suggest VCs’ IPO Capitalization share effectively captures both VC screening and monitoring expertise. My findings have financial implications for limited partners and entrepreneurs regarding their VC-sorting activities.

Talk softly but carry a big stick: transfer pricing penalties and the market valuation of Japanese multinationals in the United States

Corporate income tax law in OECD countries requires multinational enterprises (MNEs) to set their transfer prices according to the arm's length standard. In 1990 the United States (US) government introduced a transfer pricing penalty for cases where MNEs deviated substantially from this standard. More than two dozen other governments have followed suit. Our paper uses event study methodology to assess the impact of the US transfer pricing penalty on the stock market valuation of Japanese MNEs with US subsidiaries in the 1990s. We find that the penalty caused a drop in their cumulative market value of $56.1 billion, representing 12.6% of their 1997 market value.

Continuous auctions and insider trading: uniqueness and risk aversion

The Kyle (1985) and Back (1992) model of continuous-time asset pricing with asymmetric information is studied. A larger class of price processes is considered, namely price processes that allow the price to depend in a certain way on the path of the market order. A no expected (or inconspicuous insider) trade theorem\/ is satisfied regardless of how much the informed agent is sensitive to the risk. When the informed agent is risk-neutral, the price pressure is constant over time and the price depends only on the cumulative market order. As a corollary, this paper extends Kyle's (1985) and Back's (1992) uniqueness result by showing that the equilibrium is also unique on this larger class of price processes. When the informed agent is risk-averse, in contrast, the price pressure decreases over time and the price depends on the entire path. The price pressure with risk aversion converges uniformly to the risk-neutral price pressure as the informed agent becomes less and less risk-averse; similarly, the equilibrium with risk aversion converges to the risk-neutral equilibrium.

Tax Management, Sustainable Competitive Advantage, and the Effects of Tax Reform

This study examines whether firms' advantage from lower explicit taxes (tax management) is mitigated by lower pre-tax incomes (implicit taxes) and whether this advantage creates sustainable competitive advantage. We investigate a sample of firms with low explicit tax rates prior to the enactment of the Tax Reform Act of 1986 (the Act) and a control sample of firms with higher explicit taxes, over a 14-year period bracketing the Act. In years prior to the Act, we find that lower explicit taxes were offset by correspondingly lower pre-tax incomes such that after-tax incomes were equal. Cumulative market returns from portfolio investments in each sample's equity securities were also equal suggesting that no competitive advantage existed during this period. In the years immediately after the Act, the differences in explicit taxes narrowed but differences in pre-tax incomes diminished less, such that after-tax incomes of the low tax rate firms suffered. Market returns were similarly lower. In the final years, the after-tax incomes and market returns returned to equality. These results suggest that aggressive tax management, like many other behaviors, tends not to yield a sustainable competitive advantage. Rather, frictions in unwinding implicit taxes seemingly result in a short-term competitive disadvantage following tax reform aimed at leveling the explicit tax playing field.

Deregulating Direct‐to‐Consumer Marketing of Prescription Drugs: Effects on Prescription and Over‐the‐Counter Product Sales

Abstract This paper examines the impact and interrelationships between direct‐to‐consumer (DTC) and physician‐oriented marketing on the sales composition of the prescription (Rx) and over‐the‐counter (OTC) versions of antiulcer and heartburn medications. To understand better the implications for competition of the 1997 Food and Drug Administration’s policies regarding DTC marketing, as well as recent Rx‐to‐OTC switch approvals, we also examine the relationship between order‐of‐entry effects and marketing intensities. We find spillover effects of marketing for Rx drugs on same‐brand OTC versions of the drugs. We also find that the ratio of cumulative marketing intensity (cumulative marketing efforts divided by cumulative sales) in the OTC segment increases monotonically with order of entry. Our regression results show that various marketing demand elasticities depend on order of entry. Our findings document the importance of nonprice competition in the OTC drug market and suggest that the recent deregulati...

When is Enough, Enough? Market Reaction to Highly Dilutive Stock Option Plans and the Subsequent Impact on CEO Compensation

Early studies of market reaction to stock option plans have found positive increases in stock prices upon the announcement of these plans. However, since in the mid-1990's, shareholders have become increasingly critical of stock option plans, and voted against them in growing numbers. Are shareholders fed up with the continued growth in option compensation, and if so, what are boards of directors doing in response to these concerns? In this paper, we use data from the 1998 proxy season to reevaluate market reaction to management-sponsored proposals for stock option plans, the level of opposition to these plans, and the effect of this opposition on corporate boards' awards of CEO compensation in subsequent years. In the first half of the paper, we conduct an event study similar to those done for early stock option plans from the 1980's and early 1990's. However, we expect to find that the market will react differently to plans that exhibit the high levels of potential dilution of ownership and certain shareholder unfriendly aspects of the plans that make shareholders more likely to vote against such plans. Our findings support part of our hypothesis: we find that higher levels of potential dilution in executive-only plans result in significantly negative cumulative market adjusted returns in the 3-day period surrounding the proxy date, but that plans that include repricing provisions, permit executives to borrow money from the firm in order to exercise options, or that allow the issuance of restricted stock, do not experience significantly negative returns. In the second part of the paper, we present evidence regarding the factors that affect voting opposition to stock option plans and the impact of this opposition on subsequent CEO compensation. In cross-sectional regressions, we find a significantly negative relationship between the percentage vote against the option proposal and the percentage change in salary and in total pay from the 1999 to 1998 compensation years. We interpret this finding to support the idea that boards of directors respond to concerns about CEO option awards by reducing executive pay in the year after a high level of opposition.

The long run performance of Malaysian initial public offerings (IPO): value and growth effects

Outlines previous research on the underpricing of initial public offerings (IPOs), describes the institutional framework for IPOs in Malaysia and presents a study of long run Malaysian IPO performance using 1992‐1996 data on 258 IPOs, classified into growth or value portfolios. Explains the methodology and presents the results, which show that value IPOs outperform growth IPOs, while both outperform the market. Finds their cumulative market adjusted return (averaged at 41.7 per cent) positively correlated with book‐to‐market equity, earnings‐to‐price, cashflows‐to‐price and the time lag between close of application and actual listing; and negatively related to the IPO price and size. Briefly considers consistency with other research and the market implications.

Building a longitudinal contact strategy™

Companies dealing with a large customer base and especially those with infrequent purchase or service interactions face the challenge of developing and maintaining a long-term relationship with customers. In addition to offering products for sale, marketing communications can add significantly to the customer relationship and brand-building process. Traditionally, customer contact is maintained using a campaign-oriented, effort-by-effort approach to selecting customers for contact. This paper suggests development of a Longitudinal Contact Strategy TM to plan customer contacts over a substantial time horizon. Data analysis can be used to determine (a) what to say to the customer, (b) when to make the contact, and (c) how much to spend on each customer. Results can be measured by comparing the cumulative marketing expense to the cumulative revenue produced.

Bias and Systematic Change in the Parameter Estimates of Macro-Level Diffusion Models

Studies estimating the Bass model and other macro-level diffusion models with an unknown ceiling feature three curious empirical regularities: (i) the estimated ceiling is often close to the cumulative number of adopters in the last observation period, (ii) the estimated coefficient of social contagion or imitation tends to decrease as one adds later observations to the data set, and (iii) the estimated coefficient of social contagion or imitation tends to decrease systematically as the estimated ceiling increases. We analyze these patterns in detail, focusing on the Bass model and the nonlinear least squares (NLS) estimation method. Using both empirical and simulated diffusion data, we show that NLS estimates of the Bass model coefficients are biased and that they change systematically as one extends the number of observations used in the estimation. We also identify the lack of richness in the data compared to the complexity of the model (known as ill-conditioning) as the cause of these estimation problems. In an empirical analysis of twelve innovations, we assess how the model parameter estimates change as one adds later observations to the data set. Our analysis shows that, on average, a 10% increase in the observed cumulative market penetration is associated with, roughly, a 5% increase in estimated market size m, a 10% decrease in the estimated co-efficient of imitation q, and a 15% increase the estimated co-efficient of innovation p. A simulation study shows that the NLS parameter estimates of the Bass model change systematically as one adds later observations to the data set, even in the absence of model misspecification. We find about the same effect sizes as in the empirical analysis. The simulation also shows that the estimates are biased and that the amount of bias is a function of (i) the amount of noise in the data, (ii) the number of data points, and (iii) the difference between the cumulative penetration in the last observation period and the true penetration ceiling (i.e., the extent of right censoring). All three conditions affect the level of ill-conditioning in the estimation, which, in turn, affects bias in NLS regression. In situations consistent with marketing applications, m can be underestimated by 20%, p underestimated by the same amount, and q overestimated by 30%. The existence of a downward bias in the estimate of m and an upward bias in the estimate of q, and the fact that these biases become smaller as the number of data points increases and the censoring decreases, can explain why systematic changes in the parameter estimates are observed in many applications. A reduced bias, though, is not the only possible explanation for the systematic change in parameter estimates observed in empirical studies. Not accounting for the growth in the population, for the effect of economic and marketing variables, or for population heterogeneity is likely to result in increasing m̂ and decreasing q̂ as well. In an analysis of six innovations, however, we find that attempts to address possible model misspecification problems by making the model more flexible and adding free parameters result in larger rather than smaller systematic changes in the estimates. The bias and systematic change problems we identify are sufficiently large to make long-term predictive, prescriptive and descriptive applications of Bass-type models problematic. Hence, our results should be of interest to diffusion researchers as well as to users of diffusion models, including market forecasters and strategic market planners.