Hypothesis Of Formation Research Articles

Interaction effects between consumer information and firms' decision rules in a duopoly: how cognitive features can impact market dynamics

Duopolies are situations where two independent sellers compete for capturing market share. Such duopolies exist in the world economy (e.g., Boeing/Airbus, Samsung/Apple, Visa/MasterCard) and have been studied extensively in the literature using theoretical models. Among these models, the spatial model of Hotelling (1929) is certainly the most prolific and has generated subsequent literature, each work introducing some variation leading to different conclusions. However, most models assume consumers have unlimited access to information (perfect information hypothesis) and to be rational. Here, we consider a situation where consumers have limited access to information and explore how this factor influences the behavior of competing firms. We first characterized three decision-making processes followed by individual firms (maximizing one's profit, maximizing one's relative profit with respect to the competitor; or tacit collusion) using a simulated model, varying the level of information of consumers. These manipulations alternatively lead the firms to minimally or maximally differentiate their relative position. We then tested the model with human participants in the role of firms and characterized their behavior according to the model. Our results demonstrate that limited access to information by consumers can actually induce a mutually beneficial non-competitive behavior of firms, which is not traceable to explicit collusive strategies. Imperfect information on the part of consumers can hence be exploited by firms through basic and blind decision rules.

MatCALO: Knowledge-enabled machine learning in materials science

Industrial and technological innovations constantly call for the development of materials that meet specific and novel requirement profiles. However, the engineering of materials with the desired properties is a time-, cost-, and labor-intensive process as changing the composition and the parameterization of processing steps yields an unimaginably large search space. It is therefore crucial for the future engineering of materials to be conducted in a more goal-directed and more efficient way to generate informative hypotheses revealing particularly promising experiments and thus guiding the exploration process in a more informed fashion. In this paper, we present MatCALO, an intelligent, cognitive assistant system that supports materials scientists in developing novel materials. MatCALO combines modern machine learning techniques with machine-interpretable semantic knowledge in order to model representations of relationships between materials, processes and properties and allow reasoning about them. We showcase a prototypical approach for generating such hypotheses by reverse-querying regression models learned from experimental data. However, a workable set of experiments alone generally does not suffice as it will never cover an adequately large area of the search space, which led us to the conclusion that additional background knowledge is required to build more reliable models. The readers can assure themselves of the feasibility of this approach by testing the web-based interface using the MatCALO system which will be made available to the broad community. Given a requirement profile, the system generates hypotheses on how these criteria can be achieved.

The role of tonic immobility and control in the development of intrusive memories after experimental trauma

ABSTRACTTonic immobility (TI; state of motor inhibition during threat) has been implicated in the onset of intrusive trauma memories, while controllability was associated with reduced anxiety. The present study investigated the interaction between TI and control in the development of intrusive memories of an analogue trauma. Sixty-four participants watched negative pictures while being allowed to close their eyes (InControl) or not (NoControl). They completed measures for spontaneous TI afterwards and recorded intrusive memories of the pictures in a diary in the subsequent week. Bayesian analyses were used to test informative hypotheses. Spontaneous TI during picture viewing was positively associated with increased intrusion frequency. Intrusion frequency did not differ for InControl versus NoControl. Moderation (control x TI) and non-moderation (main effect of TI only) were both adequate models, with no preference. Our results confirm the importance of TI in PTSD development. Implications of the findings regarding control merit more research.

The relationship between trading volume and exchange rate volatility: linear or nonlinear?

PurposeThe purpose of this paper is to examine the linear and nonlinear relations between returns volatility and trading volume for the Indian currency futures market.Design/methodology/approachTo examine the contemporaneous relation between returns volatility and volume, the author uses the generalized method of moment estimator. For the linear causal relation, the author makes use of Granger (1969) bivariate vector autoregression model. The author tests for nonlinear Granger causality between returns volatility and trading volume based on a modified version of the Baek and Brock (1992) nonparametric technique developed by Hiemstra and Jones (1994).FindingsThe results indicate a negative contemporaneous relation between returns volatility and trading volume; therefore, the mixture of distribution hypothesis is not supported. The results of both linear and nonlinear Granger causality between futures returns volatility and trading volume indicate a significant bidirectional relation between the two variables lending support to the sequential arrival of information hypothesis. The results are robust to divergence of opinions as proxied by open interest.Practical implicationsThe findings of this paper are important for the participants in the market and regulators. The participants in the market require alternatives to diversify their risk. The significant causal relation between returns volatility and trading volume implies that trading volume helps predict the futures prices and should lead to creation of more reliable hedging strategies for investment purposes. Furthermore, it may interest the regulators who need to decide upon the appropriateness of their policies in the currency futures market.Originality/valueTo the best of the author’s knowledge, there is no study that investigates the forecast ability of trading volume to futures returns volatility in an emerging currency futures market. Given that currency futures market is one of the largest markets in the world, and Indian rupee has seen wide fluctuations in the recent years, it seems exciting to explore the price–volume relation in the Indian currency futures market.

Imperfect Information in Macroeconomics

This article presents some recent theoretical and empirical contributions to the macroeconomic literature that challenge the perfect information hypo-thesis. By taking into account the information frictions encountered by economic agents, it is possible to explain some of the empirical regularities that are difficult to rationalise in the standard framework of full information rational expectations. As an example, we discuss how the sign, size and persistence of the estimated effects of monetary and fiscal policies can change when the informational frictions experienced by economic agents are taken into account.

An ERP study of anaphor resolution with focused and non-focused antecedents

AbstractThe goal of this study is to better understand when (and why) the combination of semantic overlap between antecedent and anaphor and antecedent focus leads to difficulty in anaphor processing. To investigate these questions, three ERP experiments manipulating semantic overlap and focus compared the ERPs from the onset of the anaphor as well as from the onset of the last word in the sentence containing the anaphor. Our results suggest that although the focus status of an antecedent and the semantic overlap between the antecedent and anaphor are important, these factors are not the only significant contributors to online anaphor resolution. Factors such as readers’ expectations about thematic shifts also influence the processing. We consider our results in relation to two accounts of anaphor resolution, the Informational Load Hypothesis (Almor, 1999; Almor & Eimas, 2008) and JANUS (Garnham & Cowles, 2008).

The role of information in retail gasoline price dispersion

Collecting information on prices is a costly endeavor. The cost depends on the relative ease with which those prices can be collected, and in many retail gasoline markets, there is a substantial divide in the ease of collecting information with regular grade gasoline on one side of the divide and midgrade and premium grade gasoline on the other. Regular grade prices are prominently displayed on large signboards in front of gasoline stations while the prices of higher octane grades, except where required by law, are rarely displayed. In this article, the effects of differential-by-grade price information on search and gasoline price dispersion are examined. A rank reversal test is used to test whether the observed grade-specific price dispersion is consistent with search or non-search related causes and, finding the former, a series of tests are presented to test for the effect of price information and other leading hypotheses. A significantly concave curvature in the price dispersion coefficients across the three grades supports a price information hypothesis. Detailed socioeconomic data on consumers, spatially matched to the stations they are most likely to patronize, shows that income is a secondary factor. Implications for policy are discussed.

PREDETERMINED TIME STUDY APPLICATION AS A MEASUREMENT TIME STUDY CALCULATION TOOL

Evaluation of the results of the development of a standard time calculation system which has been applied for approximately 1 semester (6 months) is done by using Webqual instruments where there are 3 parts of testing, namely usability quality, information quality and interaction quality. This assessment instrument emphasizes the assessment of information systems based on the perspective of the last user. As for the results of the validity of the Pearson Correlation score and by observing the score of Corrected Item - Total Correlation which is above 0.6 or equal to 0.6 and the reliability test results has obtained the score of chronbach's alpha above 0.60. And the results of the hypothesis for the variable usability quality is 0.700, which means that Usability Quality (X1) has a close relationship or influence on Overall Impression (Y), the results of the variable Quality Information hypothesis (X2) correlation coefficient 0.715 which means that the assessment has a relationship or close influence on Overall Impression (Y), and the results of the hypothesis variable Interaction Quality (X3) correlation coefficient 0.813 which means that the assessment has a close relationship or influence on Overall Impression (Y).

Does environmental, social and governance performance influence intellectual capital disclosure tone in integrated reporting?

PurposeThe integrated reporting framework seeks to connect a firm’s financial and non-financial performance in a single report by displaying how different forms of capital contribute to the firm’s value creation. Drawing on impression management and incremental information approaches, the purpose of this paper is to examine how the content and semantic properties of intellectual capital disclosure (ICD) found in integrated reports is associated with firms’ performance.Design/methodology/approachAll reports by European listed firms from 2011 to 2016 available via the integrated reporting emerging practice examples database are analysed. Content analysis is used to assesses the quality of ICDs, whereas a regression analysis tests the variation in semantic properties of ICDs according to firms’ performance.FindingsICDs in integrated reports are mainly discursive, with a backward looking orientation and a limited focus on human capital. On average, more than half of each ICD is conveyed in a positive tone. As the optimistic tone in firms’ ICDs increases, so too does their non-financial performance measured in terms of environmental, social and governance aspects. This finding supports the incremental information approach.Originality/valueThis paper contributes to the current literature on ICDs by introducing new evidence on firms’ motivations for non-financial disclosures in integrated reports. By taking a more comprehensive theoretical approach, namely, testing both impression management and incremental information hypotheses, this research extends on prior studies which tested similar relationships in integrated reports but focussed only on the impression management hypothesis.

Do industry returns predict the stock market? A reprise using the random forest

The prior work reports conflicting evidence on the information content of industry returns for the market index return. We reexamine the out of sample predictive ability of industry returns by considering several relatively advanced methods from the statistical learning literature. We show that when the random forest method, which accounts for both linear and nonlinear dynamics, is used for regression, industry returns indeed contain significant out of sample forecasting power for the market index return. Moreover, our analysis also presents evidence for lead-lag relations among individual industry returns. The reported findings are consistent with the implications of the gradual diffusion of information hypothesis.

The Role of Information in Retail Gasoline Price Dispersion

Collecting information on prices is a costly endeavor. The cost depends on the relative ease with which those prices can be collected, and in many retail gasoline markets, there is a substantial divide in the ease of collecting information with regular grade gasoline on one side of the divide and midgrade and premium grade gasoline on the other. Regular grade prices are prominently displayed on large signboards in front of gasoline stations while the prices of higher octane grades, except where required by law, are rarely displayed. In this article, the effects of differential-by-grade price information on search and gasoline price dispersion are examined. A rank reversal test is used to test whether the observed grade-specific price dispersion is consistent with search or non-search related causes and, Finding the former, a series of tests are presented to test for the effect of price information and other leading hypotheses. A significantly concave curvature in the price dispersion coefficients across the three grades supports a price information hypothesis. Detailed socioeconomic data on consumers, spatially matched to the stations they are most likely to patronize, shows that income is a secondary factor. Implications for policy are discussed.

Bank Competition and Firm Credit Availability: Firm-Bank Evidence From Europe

We examine the impact of bank competition on firms' access to credit using a large panel of 900 banks matched to almost 60.000 firms across the euro area over the period 2010-2016. Results provide empirical support for the market power hypothesis whereby low inter-bank competition worsens firms' credit conditions. Specifically, we find that higher bank market power is associated with lower short and long-term bank credit, higher reliance on trade credit and higher funding costs for corporate borrowers. Furthermore, the effect of bank competition is heterogeneous across firms and banks. On the one hand, high bank market power is especially detrimental for small and opaque firms, suggesting that low competition exacerbates the financial constraint of borrowers most exposed to information problems. On the other hand, the reduction in credit availability associated with high market power is attenuated for firms that borrow from small and local community banks, a finding consistent with the information hypothesis, whereby low competition increases banks’ incentive to supply relationship loans. On balance, however, the predominance of medium-large commercial banks in our sample determines that the overall effect of low inter-bank competition on credit conditions is unequivocally adverse for most firms, i.e. the market power effect outweighs the information effect. This evidence contributes to previous research on bank competition, firms’ credit constraint and relationship lending, and has implications for competition policy. Indeed, with respect to the prospect of greater banking consolidation in the European Union, our results suggest that considerations of efficiency and financial stability should be weighed against the potential negative consequences in terms of firms’ access to credit.

Bayesian evaluation of informative hypotheses in cluster-randomized trials

Researchers often have informative hypotheses in mind when comparing means across treatment groups, such as H1 : μA < μB < μC and H2 : μB < μA < μC, and want to compare these hypotheses to each other directly. This can be done by means of Bayesian inference. This article discusses the disadvantages of the frequentist approach to null hypothesis testing and the advantages of the Bayesian approach. It demonstrates how to use the Bayesian approach to hypothesis testing in the setting of cluster-randomized trials. The data from a school-based smoking prevention intervention with four treatment groups are used to illustrate the Bayesian approach. The main advantage of the Bayesian approach is that it provides a degree of evidence from the collected data in favor of an informative hypothesis. Furthermore, a simulation study was conducted to investigate how Bayes factors behave with cluster-randomized trials. The results from the simulation study showed that the Bayes factor increases with increasing number of clusters, cluster size, and effect size, and decreases with increasing intraclass correlation coefficient. The effect of the number of clusters is stronger than the effect of cluster size. With a small number of clusters, the effect of increasing cluster size may be weak, especially when the intraclass correlation coefficient is large. In conclusion, the study showed that the Bayes factor is affected by sample size and intraclass correlation similarly to how these parameters affect statistical power in the frequentist approach of null hypothesis significance testing. Bayesian evaluation may be used as an alternative to null hypotheses testing.

Bayesian evaluation of informative hypotheses for multiple populations.

The software package Bain can be used for the evaluation of informative hypotheses with respect to the parameters of a wide range of statistical models. For pairs of hypotheses the support in the data is quantified using the approximate adjusted fractional Bayes factor (BF). Currently, the data have to come from one population or have to consist of samples of equal size obtained from multiple populations. If samples of unequal size are obtained from multiple populations, the BF can be shown to be inconsistent. This paper examines how the approach implemented in Bain can be generalized such that multiple-population data can properly be processed. The resulting multiple-population approximate adjusted fractional Bayes factor is implemented in the R package Bain.

What drives the demand for information in the commodity market?

We investigate the interplay between investor attention to several commodities (oil, gold, silver, copper, platinum, palladium and zinc) and investors' confidence, economic uncertainty, macroeconomic announcements and investor sentiment for 2004–2017. Using market-based and media-based measures for investor sentiment, we establish that they both prompt investors to intensify their quest for information. In addition, shocks in these commodities, captured by several volatility estimators, generally drive investors' attention. On the other hand, greater variations in searches for information predict an increase in the following trading day's volatility. We also document that macroeconomic announcements tend to be associated with more demand for information (attention) about oil, platinum and palladium, and fewer for gold, silver and zinc. Finally, we demonstrate that the demand for information varies across weekdays, which corresponds to the arrival of information hypothesis. Our findings support the theoretical contention that risk-averse agents gather information as a hedge against uncertainty, but do not support the information avoidance theories.

Crude oil and gasoline volatility risk into a Realized-EGARCH model

This paper disentangles oil volatility risk to two components. The first component is attributed to crude oil, while the second is related to gasoline. This disentanglement serves the purpose of investigating the extent to which crude oil and gasoline are complementary in impacting return and variance residuals. The Realized-EGARCH model of Hansen et al. (J Appl Econom 29(5):774–799, 2014) is used to test the hypothesis that stock markets show some delay in incorporating oil information. This study shows that both crude oil- and gasoline-based information impact stock markets contemporaneously in a complementary fashion. Unlike the underreaction hypothesis, which is suggested as an explanation to the negative lagged effect of crude oil price change on return, the sequential information hypothesis explains better the ways information about oil is disseminated among U.S. industry portfolios.

Private information in currency markets

Using daily abnormal currency returns for the universe of countries with flexible exchange rates, we show local currency depreciations ahead of unscheduled, public sovereign debt downgrade announcements. Consistent with the private information hypothesis, the effect is stronger in lower institutional quality countries and holds after we control for concurrent public information and for publicly available rumors about the forthcoming downgrades. Our results persist when abnormal currency returns are adjusted for global carry and dollar risk factors, world equity and bond returns, as well as local stock market returns. Finally, the currency depreciations are permanent, providing evidence for a link between fundamentals and currency markets.

Information Asymmetry in Spinoffs: The Role of Incremental Disclosure

Prior research argues that one reason firms engage in corporate spinoffs is to increase firm value by reducing information asymmetry with shareholders (the “information hypothesis”). However, the literature has yet to identify a mechanism through which this reduction in information asymmetry occurs. We argue that incremental disclosure is one mechanism by which spinoffs reduce information asymmetry. Using text re-use detection software to compare the initial 10-Ks of spun-off firms to the 10-Ks of pre-spinoff combined entities, we predict and find a positive association between pre-spinoff information asymmetry and incremental post-spinoff disclosure. However, these results are driven by cross-industry spinoffs that are likely to be operationally motivated. Taken together, these results suggest that the “information hypothesis” does not appear to have standalone merit, in that information-motivated spinoffs do not appear to occur in the absence of operational motives. Finally, we examine consequences of innovation in disclosure following spinoffs and find that incremental disclosure is indeed associated with decreases in information asymmetry and increases in firm value. Overall, we find that 10-K disclosures are a mechanism by which spinoffs reduce information asymmetry, but that reducing information asymmetry does not appear to be the sole motivation for these transactions.

Body representation does not lag behind in updating for the pubertal growth spurt

Both making perceptual judgments about your own body and successfully moving your body through the world depend on a mental representation of the body. However, there are indications that moving might be challenging when your body is changing. For instance, the pubertal growth spurt has been reported to be negatively correlated to motor competence. A possible explanation for this clumsiness would be that when the body is growing fast, updating the body representation may lag behind, resulting in a mismatch between internal body representation and actual body size. The current study investigated this hypothesis by testing participants ranging from aged 6 to 50 years on both a tactile body image task and a motor body schema task. Separate groups of participants, including those in the age range when pubertal growth spurt occurs, were asked to estimate the distance between two simultaneously applied tactile stimuli on the arm and to move their hand through apertures of different widths. Tactile distance estimations were equal between participants before, during, and after the age range where the pubertal growth spurt is expected. Similarly, Bayesian evaluation of informative hypotheses showed that participants in the age range of the growth spurt did not move through the apertures as if their representation of the hand was smaller than its physical size. These results suggest that body representations do not lag behind in updating for the pubertal growth spurt.

Performance of stock price with changes in SRI governance index

AbstractWe investigate the performance of the stock and volume effect associated with changes in the composition of the socially responsible investment (SRI) governance index during a period from 2003 to 2012. It turns out that, in the short term and long term, the announcement of inclusion in the SRI governance index has a positive effect in the stock market; however, exclusion from the SRI governance index has a negative effect. The price reversal phenomenon partly appears in the short term, and stock prices are increased again. The increase of stock prices in the short and long runs indicates a change in intrinsic value. The performance of stock prices in the short and long runs is positive (+); this is caused by the downward‐sloping demand curve (DSDC). The trading volume for event periods is a little more than the current volume in trading volume analysis. Therefore, using these results, we can adopt the price pressure hypothesis, information hypothesis, DSDC hypothesis and liquidity hypothesis.