Market Setting Research Articles

Robust portfolio choice under the 4/2 stochastic volatility model

Abstract This paper provides the first optimal portfolio analysis for a constant relative risk-averse and ambiguity-averse investor under the state-of-the-art 4/2 stochastic volatility model in a complete market setting. We determine the robust optimal strategy and the worst case measure by allowing separate levels of uncertainty for variance and stock drivers. Technical conditions for well-defined solutions are detailed together with a verification result. The robust optimal investment exposure displays a dependence on current volatility levels similar to the non-robust case further impacted by the ambiguity-aversion level. Using real-world parameters, the numerical analysis finds that wealth-equivalent losses (WELs) from ignoring uncertainty or market completeness are moderate. On the other hand, WELs for investors who follow simpler but popular strategies, such as Heston (1/2 model) and Merton (geometric Brownian motion [GBM] model), could be quite substantial, of up to 24 and 51%, respectively. This latest analysis comes from new non-affine representations for the suboptimal value function of the 1/2 and GBM strategies.

Uplift modeling and its implications for B2B customer churn prediction: A segmentation-based modeling approach

Business-to-business (B2B) customer retention relies heavily on analytics and predictive modeling to support decision making. Given this, we introduce uplift modeling as a relevant prescriptive analytics tool. In particular, the uplift logit leaf model offers a segmentation-based algorithm that combines predictive performance with interpretability. Applied to a real-world data set of 6432 customers of a European software provider, the uplift logit leaf model achieves superior performance relative to three other popular uplift models in our study. The accessibility of output gained from the uplift logit leaf model also is showcased with a case study, which reveals relevant managerial insights. This new tool thus delivers novel insights in the form of customized, global, and segment-level visualizations that are especially pertinent to industrial marketing settings. Overall, the findings affirm the viability of uplift modeling for improving decisions related to B2B customer retention management.

Framing Static and Dynamic Time-Periods through the Teleological Lens in the Implementation Process of Enterprise Resource Planning

ABSTRACT Purpose Enterprise Resource Planning (ERP) is a technological tool which improves and eases B to B communication and reinforces business relationships as well as business-to-business (B to B) marketing. Based on a teleological lens in B to B relationships between ERP sellers and ERP buyers, the research objective of this study is to frame static and dynamic time-frames in the ERP implementation process in B to B markets. The aim is to shed light on the consideration of time-periods (i.e. past, present and future) as either tatic or dynamic in the implementation process of complex service solutions, such as ERP, in a B to B marketing setting. Design/methodology/approach This study is conducted with respect to Spanish companies focusing on the first main pre-implementation, first main implementation and first main post-implementation process of ERP software solutions in B to B markets. This study embraces a multi-method design consisting of the four phases. It enables data triangulation through in-depth structured interviews in a follow-up study, so as to validate the results. Findings Reports static and dynamic time-periods through a teleological lens in the implementation process of ERP in B to B market of the Spanish healthcare industry. This study indicates that more than half of the ERP buyers were not entirely satisfied, after finalizing the ERP implementation process. Subsequently, less than half of them received only a software solution and the rest considered they had received merely a somewhat adapted software solution. Furthermore, only one out of ten confirmed that the software solution obtained was a fully adapted solution beyond the ERP buyers’ expectations and truly taking into account their needs. This study also reveals that there are still some ERP implementation processes indicating that the seller does not take into account the needs of the buyer at all. Altogether, the findings indicate that the B to B marketing process is often not satisfactory. It is widely known that the ERP is a standardized tool that requires adaptation of the ERP software solution to the buyer’ in B to B markets. Research limitations/implications The combination of static and dynamic considerations of time with formative, rationalist and transformative teleological lenses outline and distinguish between various strategies for handling the ERP pre-implementation process, the ERP implementation process and the ERP post-implementation process in B to B marketing. We contend that another core research implication in B to B marketing, taking into consideration static and dynamic time-periods through the teleological lens, addresses the need to match the ERP seller perspective with that of the ERP buyer. A mismatch may turn out unsatisfactorily for both the ERP seller and the ERP buyer. It is therefore crucial in the B to B marketing strategy that there be a balance between flexibility and adaptations of the ERP seller to the expectations and experiences of the ERP buyer in the ERP implementation processes in B to B markets. Managerial implications Offers opportunities for companies to apply B to B marketing strategies through visualizing in advance the cost and risk associated with an ERP implementation. Furthermore, this study enables the framing of other complex service implementation processes such as the ERP software solution. A core managerial implication of the results reported in this study to B to B marketing is the need to distinguish between static and dynamic, using the time-periods in the ERP implementation. The ERP seller needs to align its strategy of B to B marketing with its consequences from the ERP pre- and post-implementation processes. Another core managerial implication is that the static and formative use of time entails less costs initially. It enables the ERP seller to obtain benefits within a short time-frame. However, the ERP seller may have to face a dissatisfied ERP buyer at the end of the implementation process. Subsequently, the risk of the relationship disruption is high, so that this strategy of B to B marketing has a short-time orientation, based on targeting many ERP buyers and devoting less effort to each of them (by the ERP seller). In the case of the dynamic and rationalist use of time-periods, the ERP seller has chosen a strategy of B to B marketing with the ERP buyer that can turn out satisfactorily. However, the initial costs are higher than when the static consideration of time is used because the ERP seller needs more resources, expertise and skills to visualize the end of the implementation process taking into account the actual requirements. Originality/value Frames static and dynamic time-periods which influence the B to B marketing strategy used in the implementation process of ERP in the healthcare industry. The teleological lens applied in this study contributes to contextualizing as marketing B to B tool the ERP implementation process as being either past-based (formative), present-based (transformative) or future-based (rationalist).

Developing and Testing a Smartphone Dependency Scale Assessing Addiction Risk

A 2019 Pew study of emerging economies revealed citizen concerns over smartphone use as risky behavior and their ill effects, such as addiction and overdependency, among many factors. In response, the authors developed a smartphone dependency scale (SDS) of factors that contribute to smartphone addiction, particularly for emerging economies like the Philippines. The instrument was developed from previously validated constructs. They propose that social influence, convenience, affective (anxiety), physiological (maladjustment), and cognitive (mindfulness) factors separately drive smartphone dependency. To test the SDS, the authors surveyed 901 Philippine participants. The scales showed excellent internal consistency and reliability and adequate concurrent and criterion-related validities. A confirmatory factor analysis showed that SDS factors had good data fit. This instrument is a first step in (1) exploring why individuals become dependent (addicted) on mobile devices and (2) stimulating further research concerning smartphone dependency for emerging market settings.

Enumerating the value of financial advice in a competitive market

This paper introduces and examines a composite, dual fee structure (CDFS) for financial planners that helps quantify the value of financial advice. Our structure specifically separates financial plan- ning (advice) fees based on total net worth (NW) from Investment Management (IM) fees based on assets under management (AUM), which are readily observable and pervasive in the marketplace. Doing so facilitates quantifying the value of this financial advice in a competitive market setting. Knowing the financial value of the non-IM component of financial planning services can reduce per- ceived conflicts of interest by permitting financial planners to generate compensation for non-IM planning activities in a transparent manner, whether or not the client moves investable funds to the planner.

Mutual fund manager turnover: an empirical investigation of performance

PurposeWhen a fund manager leaves, the investment strategy of the fund changes or remains the same. The departing fund manager's resignation is either forced or voluntary. The study investigates the relationship between the portfolio manager's transition and the fund's investment strategy and how the change affects the mutual fund returns in the subsequent period.Design/methodology/approachThe authors examine 148 fund manager changes in India between April 2005–March 2018 using three performance measures: abnormal return (fund return minus benchmark return), Jensen's alpha and Carhart four-factor alpha. The analysis includes an event study methodology, followed by a two-step Fama–MacBeth regression approach.FindingsContrary to the previous studies conducted in the developed markets, the authors find that fund performance improves irrespective of whether the fund manager change is forced or voluntary. The outperformance after the fund manager's exit is significant for funds belonging to the larger fund families.Originality/valueIn the context of investment management, the authors provide a conceptual framework to understand the effect of fund manager exit on mutual fund performance. The authors substantiate their arguments with empirical evidence. To the best of the authors' understanding, this is the first research to examine the effect of changing mutual fund managers in an emerging market setting.

How Field Experiments in Economics Can Complement Psychological Research on Judgment Biases

This review summarizes results of field experiments examining individual behaviors across several market settings—from open-air markets to rideshare markets to tax-compliance markets—where people sort themselves into market roles wherein they make consequential decisions. Using three distinct examples from my own research on the endowment effect, left-digit bias, and omission bias, I showcase how field experiments can help researchers understand mediators, heterogeneity, and causal moderation involved in judgment biases in the field. In this manner, the review highlights that economic field experiments can serve an invaluable intellectual role alongside traditional laboratory research.

Disclosure regulation and incentive uncertainty

AbstractThis discussion provides a framework incorporating key forces at play when regulating disclosure in financial market settings. Given the potential for politically costly implementation and legal challenges of regulations aimed at reducing investor uncertainty about a firm or information intermediaries incentives, the question arises whether enhanced information about the incentives of manager and information intermediaries is likely to yield disclosure that is more transparent. This discussion focuses on how the efficient regulation of information providers depends critically on the generic properties of the type of information that they communicate to investors and investor uncertainty about the interests of the information provider.

Competences of Career Counsellors in Conditions of Uncertain Future - Context of 4th Industrial Revolution

Current labour market is influenced by uncertainty posed by challenges of occurring trends. Those trends are on the one hand shaped by demographic changes influencing labour supply and on the other hand transformations provided by 4th industrial revolution. Emerging innovative technological development, in addition to demographics and rising inequality, brings widespread automation and irreversible shifts in the structure of jobs giving rise to new opportunities but also creating new areas of uncertainty. The unpredictability of the labour market sets new tasks for the institutions supporting better adjustment of labour supply to demand needs. Crucial institution realizing those tasks are career counsellors who provide their service for different groups of clients. Effective career guidance is determined by comprehensive competences of counsellors. It should be noted that with regard to competences in the context of Industry 4.0, most of the research to date has focused on the analysis of employees' competences rather than on the competences of career counsellors. The development of the future labour market is subject to a hitherto unknown transformation. These premises, as well as the originality and validity of the research, both in the national and European dimension, prompted the authors to conduct innovative qualitative study. The aim of the article is to identify future competences of career counsellors in line with the ongoing trends on the labour market

Broadening the Collective Turn in Marketing: From Consumer Collectives to Consumption Agencements

Broadening the Collective Turn in Marketing: From Consumer Collectives to Consumption Agencements

Towards reinforcement learning for vulnerability analysis in power-economic systems

Future smart grids can and will be subject of systematic attacks that can result in monetary costs and reduced system stability. These attacks are not necessarily malicious, but can be economically motivated as well. Emerging flexibility markets are of interest here, because they can incite attacks if market design is flawed. The dimension and danger potential of such strategies is still unknown. Automatic analysis tools are required to systematically search for unknown strategies and their respective countermeasures. We propose deep reinforcement learning to learn attack strategies autonomously to identify underlying systemic vulnerabilities this way. As a proof-of-concept, we apply our approach to a reactive power market setting in a distribution grid. In the case study, the attacker learned to exploit the reactive power market by using controllable loads. That was done by systematically inducing constraint violations into the system and then providing countermeasures on the flexibility market to generate profit, thus finding a hitherto unknown attack strategy. As a weak-point, we identified the optimal power flow that was used for market clearing. Our general approach is applicable to detect unknown attack vectors, to analyze a specific power system regarding vulnerabilities, and to systematically evaluate potential countermeasures.

The Relationships among Related Party Transactions, Exports and Earnings Management in Korea

Purpose - We investigate the effects of exports and related party transactions on earnings management. In addition, we study their simultaneous multilateral effects on each other in as well as their long-term effects investigated with time lags. Design/Methodology/Approach - In this study, a merged data set of accounting, financial market, and export activities of 8,687 firms listed on Korea Exchange (KRX) from 2006 to 2018 is used. We collect data from TS 2000 database. Then, we formally test our hypotheses using fixed effects models (FEM) and simultaneous equation models (SEM). Findings - First, export firms have more severe earnings management than non-export firms. Second, earnings management has a positive effect on related party transactions for the non-export firms. Third, related party transactions for export firms have a negative effect on earnings management. Fourth, simultaneous equation models verified above mentioned conclusions. Fifth, the effects of earnings management on exports lasted for years while those of exports on earnings management lasted for years. However, the effects of related party transactions on both exports and earnings management lasted only for a year. Research Implications - Based on above findings, we can conclude that firms use exports and related party transactions for earnings management and that firms use related party transactions to manipulate exports of firms. Thus, traditional way of studying earnings management using discretionary accruals might shift focus to related party transactions, especially for export firms with subsidiaries abroad.

Reimagining the post-pandemic industry of arts in the Arab world: fast-tracked digital uplift or back to business as usual?

Learning outcomes The learning outcomes of this paper are as follows: to assess the extent to which a new business concept or entrepreneurial idea represents a commercial success or practical failure, to estimate the complexities associated with the management of a partnership-based venture in the context of emerging markets, to demonstrate understanding of entrepreneurial action and strategic adaptation under the condition of uncontrollable external shocks (e.g. COVID-19) and to evaluate the pros and cons of different strategic options and provide viable recommendations for the future. Case overview/synopsis Startup entrepreneurship constitutes the backbone of the socioeconomic activity of any nation and a driver of innovation, industrial diversification and wealth generation, particularly in emerging market settings. Drawing upon narrative storytelling techniques, this case study immerses the reader into the intricacies of entrepreneurial venture creation within the dynamic startup ecosystem in the Middle East. It follows the story of a young serial entrepreneur, Omar, who decided to launch a business in the creative industry of arts in the United Arab Emirates in partnership with his friend, Ahmed. Their common venture, Mont8, showcased and promoted the artwork of budding and well-known Arab talents and was on track to become a recognizable brand in the Middle Eastern business of arts until the COVID-19 crisis shook the world taking everyone by surprise. In an attempt to build a successful post-pandemic future, Omar was convinced that Mont8 needed to fast-track its digital transformation. He envisioned an e-commerce marketplace that would empower Arab artists, designers and photographers to create customized virtual galleries on their own web-stores through the Mont8’s digital platform. Yet, Omar’s vision diverged drastically from the very conservative mindset of Ahmed, who did not want to disrupt tradition and argued in favor of a back-to-business-as-usual approach. It remains unclear whose option would be selected and whether the two partners would stay in this makeover together or rather part ways. Complexity academic level Upper-level undergraduate courses. Supplementary materials Teaching notes are available for educators only. Subject Code CSS 3: Entrepreneurship.

Does Mandatory Disclosure of CSR Reports Affect Accounting Conservatism? Evidence from China

ABSTRACT Using China’s mandatory CSR reporting program as a quasi-experiment, we examine the changes in accounting conservatism in an emerging market setting and find that the implementation of mandatory CSR policy significantly decreased accounting conservatism among firms that are required to release CSR reports. Further analyses reveal that this effect is driven by stakeholders’ concern about information asymmetry and that CSR engagement helps improve a firm’s information environment and lower the information gap. Moreover, we demonstrate that mandatory CSR reporting benefits more for firms with weaker corporate governance and greater information asymmetry. Our results hold after considering the entropy balance, a modified sample, an alternative sample period, and an alternative measure of accounting conservatism while controlling for the effect of confounding events. Overall, these findings provide evidence regarding the consequences of mandatory CSR reporting to financial reports, especially in emerging markets.

Evaluation of a front-of-pack food labeling intervention on a college campus

Objective: To evaluate the process of implementation and impact of a front-of-pack labeling intervention on purchases of labeled food products. Participants: A convenience sample of 111 college students were recruited to complete a survey as they exited markets where the intervention was being implemented. Participants had to have purchased at least one consumable item. Methods: Intercept surveys and audits were conducted at three markets, two times each over a period of three weeks. Results: The audits indicated high implementation fidelity (82% overall). However, customer surveys revealed that only 42% noticed the front-of-pack sticker, and the majority (89%) did not purchase an item with the sticker. However, customers who noticed the sticker were significantly more likely to purchase an item with the sticker (p = .002). Conclusions: These findings provide preliminary evidence for the feasibility and effectiveness of a front-of-pack labeling intervention in a university market setting.

Under What Conditions Does the Manager Withhold Segment Information?

This paper considers how a manager decides to disclose or withhold segment information in a capital market setting. In particular, we develop a multi-period model in which a manager in each period decides how to allocate her effort between two businesses. The profit earned in each segment is determined by the manager’s effort and ability as well as each segment’s market profitability and inherent uncertainty. In this setting, in contrast to the expectation of segment disclosure being withheld due to conflicts of interest between managers and shareholders, we identify the conditions under which the manager rationally withholds segment information and achieves higher social welfare. In a setting where the manager is concerned about the current stock price, disclosing more disaggregated information to the stock market does not necessarily lead to more efficient monitoring. The capital market values various segment earnings differently, and in response to this valuation, a rational manager may greatly alter her behavior, leading to inefficient outcomes.

Cost-Effectiveness Analysis of Branded Drugs With Market Demand and Insurance

ObjectivesCost-effectiveness analysis of branded pharmaceuticals presumes that both cost (or price) and marginal effectiveness levels are exogenous. This assumption underlies most judgments of the cost-effectiveness of specific drugs. In this study, we show the theoretical implications of letting both factors be endogenous by modeling pharmaceutical price setting with and without health insurance, along with patient response to the prices that depend on marginal effectiveness. We then explore the implications of these models for cost-effectiveness ratios. MethodsWe used simple textbook models of patient demand and pricing behavior of drug firms to predict market equilibria in the drug and insurance markets and to generate calculations of the cost-effectiveness ratios in those settings. ResultsWe found that ratios in market settings can be much different from those calculated in cost-effectiveness studies based on exogenous prices and treatment of all patients at risk rather than those who would demand treatment in a market setting. We also found that there may be considerable similarity in these market cost-effectiveness ratios across different products because drug firms with market power set profit-maximizing prices. ConclusionsWe found that market cost-effectiveness ratios will always indicate an excess of benefits over cost. Insurance will lead to less favorable ratios than without insurance, but when insurers bargain with drug firms, rather than taking their prices as given, cost-effectiveness ratios will be more favorable.

Competition in digital advertising markets

Digital advertising, both display advertising and search advertising, represents a very important part of the overall advertising market in the United Kingdom. Google and Facebook have a high degree of market power in search and display advertising, respectively. On 1 July 2020, the Competition and Markets Authority published its Final Report on its market study into online platforms and digital advertising, in which it looked in some depth at digital advertising markets, assessing whether a lack of transparency, conflicts of interest, and the leveraging of market power undermine competition in digital advertising. This article examines the issues considered by, and the findings of, the CMA in its Market Study and set out in its Final Report, and describes the policy options identified in the Market Study for promoting competition and other policy goals, such as data protection and privacy and ensuring the viability of news publishers, in digital advertising markets.

Identification and Estimation of Endogenous Peer Effects Using Partial Network Data from Multiple Reference Groups

There has been a considerable amount of interest in the empirical investigation of social influence in the marketing and economics literature in the last decade or so. Among the many different empirical models applied for such investigations, the most common class of model is the linear-in-means model. These models can be used to examine whether social influence is truly a result of agents affecting each other through their choices simultaneously (endogenous effect) or of having similar taste and characteristics (homophily). However, the two effects are not separately identified in general in the standard linear-in-means model unless data on all members of an individual’s network are available. With data on a sample of individuals from a network, these effects are not identified. In this research, we leverage a very natural aspect of social settings, namely that consumers are usually part of multiple—as opposed to single—networks. We discuss the sufficient conditions for identification when the standard linear-in-means model is extended to allow for multiple sources of social influence. We also show how the additional variation generated by more than one source of social influence actually allows estimation of endogenous effects with sample data. We demonstrate the feasibility of our approach via simulation and on the National Longitudinal Study on Adolescent Health data, which has been used in a number of studies examining social influence. Our approach is, therefore, likely to be useful in typical marketing settings. This paper was accepted by Matthew Shum, marketing.

Selecting Target Market Using ‘The Analytic Hierarchy Process (AHP)’ Model: TarMAR

Nations are working hard to extend their exports; resulting in increasing competitiveness of the world’s economic environment. Therefore, selecting the appropriate target market is crucial. On the other hand, it is extremely difficult to identify a proper target market due to the complexity of the problem having many attributes. Based on the 'directional policy' matrix, there are two critical parameters to select a proper target market. These are: ‘target market attractiveness’ and ‘own competitive strength’ in the market. But these two critical parameters have many objective and subjective variables. Some of these parameters can be measures such as target market size, annual growth rate, market share, distance, etc. while some of these are subjective aspects and cannot be measured such as product market conditions, tax regime, financial system, institutions, and infrastructure quality, etc. The difficulty is to compare these subjective parameters. This application aims to use 'The Analytic Hierarchy Process (AHP)' to identify the best set of the target market for a selected product range and optimize export efforts.