Preference uncertainty in contingent valuation

In this paper, the results of empirical studies that applied two widely used methods - numerical certainty scale (NCS) and polychotmous choice (PC) - for estimating preference uncertainty adjusted willingness to pay (WTP) in contingent valuation (CV), are summarized. For this review, a number of conclusions are reached. First, there is a lack of consensus about which method is more appropriate for measuring preference uncertainty. Second, although preference uncertainty information has been found useful in detecting the incidence of hypothetical bias in CV studies, a consensus about a standard certainty threshold (or treatment mechanism) at which hypothetical behaviour converges to real behaviour is yet to emerge. Third, insufficient empirical evidence exists about the causal relationship between preference uncertainty scores and the theoretically expected explanatory variables. Finally, the preference uncertainty adjusted PC and NCS models fail to provide a consistent and more efficient welfare estimate compared to the conventional dichotomous choice certainty model.     

Interaction Between Short Selling and Potential Insider Selling in the IPO Aftermarket

We document the determinants of short interest in newly public firms during the lockup period and how short interest influences the valuation effects surrounding lockup expiration. We find that the short interest is larger for stocks that have more downward price potential at lockup expiration. We also find that the stocks that are subjected to larger short positions experience more pronounced negative valuation effects upon lockup expiration. Finally, we find that the stocks with a larger short interest position just after lockup expiration experience weaker returns during the following the six-month period.     

Managing and measuring relational equity in the network economy

The Internet is emerging as a powerful connecting force, allowing firms to serve customers, collaborate with partners and suppliers, and empower employees more effectively than ever before. In the network economy, relationships with key stakeholders are becoming valuable assets of the firm, but few firms manage relationships effectively. The authors propose that firms need to take a more holistic approach to understanding where their relational equity resides and how it should be managed and measured. They also propose that relational equity is not limited to relationships with customers but also includes relationships with partners, suppliers, and employees. Effective management of relational equity requires firms to think in an integrative manner along several dimensions: strategy, process, technology, organization design, and metrics. The authors develop conceptual frameworks for each of these dimensions. Taken together, these frameworks offer a conceptual foundation for research and managerial practice on managing relational equity. Seurat Company Mohanbir Sawhney is the McCormick Tribune Professor of Technology and the director of the Center for Research Technology and Innovation at the Kellogg School of Management, North-western University. He is the coauthor (with Jeff Zabin) ofThe Seven Steps to Nirvana: Strategic Insights Into eBusiness Transformation (2001). His research has been published in leading journals such asCalifornia Management Review, Harvard Business Review, Interactive Marketing, Management Science, Marketing Science, and theJournal of the Academy of Marketing Science. He also writes for leading trade publications, including theFinancial Times, CIO Magazine, andBusiness 2.0. He has created three new M.B.A. courses at Kellogg, as well as a popular executive course, and has won several awards for teaching. He is a fellow of the World Economic Forum, a fellow at DiamondCluster International, and a charter member if The Indus Entrepreneurs (TiE). He advises and speaks to Global 2000 firms worldwide and serves on the advisory boards of several technology startup companies. He holds a Ph.D. in marketing from the Wharton School of the University of Pennsylvania. Jeff Zabin is a vice president at Seurat Company, a technology firm that specializes in Internet-based marketing resource management services. He is the coauthor (with Mohanbir Sawhney) ofThe Seven Steps to Nirvana: Strategic Insights Into eBusiness Transformation (2001). He has written about marketing in the network economy for several trade magazines, includingComputerworld, and he is a frequent speaker on the topic, with recent audiences including the Strategic Management Association, the Society for Information Management, and the Marketing Science Institute. Prior to joining Seurat, he was a research fellow with DiamondCluster International and a business analyst at a boutique consultancy called Digital Knowledge Assets. A graduate of the University of Wisconsin and a returned Peace Corps volunteer, he began his career in educational publishing at Houghton Mifflin. He has helped launch several Internet ventures and currently serves on the advisory board of PreviewPort, Inc.     

Marketing and the law

Marketing decisions are particularly vulnerable to legal rulings made in both the courts and the legislatures. The effective management of those legal implications challenges the modern marketing professional. Grasping marketing’s overall legal environment, including its governing case law, regulatory statutes, and future trends, is essential. These reviews will provide analysis of recent court cases and legislation with particular emphasis on creatively assisting the marketer’s management of the legal factor.     

Short interest in exchange-traded funds

Short selling exchange-traded funds (ETFs) has become a common means of speculating or hedging in response to pessimistic expectations about a specific market or sector, as the short interest of ETFs is more than 10 times that of individual stocks, on average. We determine that sector-based ETFs have an abnormally large short interest level, whereas international ETFs have an unusually small short interest level. The level of short interest is larger for ETFs that have a higher trading volume and a lower market capitalization, regardless of the type of ETF assessed. The level of short interest is lower for ETFs representing indexes that have tradable derivatives, but higher for international ETFs representing indexes that have tradable derivatives. We also determine that the level of short interest in an ETF serves as an effective signal of bearish sentiment when considering all ETFs, but is not an effective signal when isolating any particular type of ETF.

Pricing behavior of exchange traded funds

We attempt to determine whether characteristics found to be effective indicators of individual stock price performance are effective indicators of exchange traded fund (ETF) price performance. Specifically, we test the performance of investing strategies based on separately categorizing ETFs into deciles according to size, trading volume, and momentum. When analyzing the entire sample, we find that the indicators can effectively signal differences in future performance. However, the indicators appear to be indirect proxies for the types of ETFs (broad-based, sector, or international). When we isolate each type of ETF, the indicators are not as effective. The indicators are not as useful for signaling unusual stock price performance of ETFs as they have been for individual stocks. We attribute the distinctly different results found here for ETFs to the unusual characteristics of ETFs that distinguish them from individual stocks. Investing strategies that rely on these indicators for selecting individual stocks may be indirectly driven by stock-specific fundamentals. However, fundamentals are not as meaningful for stock indexes (represented by ETFs) as for individual stocks.

Wealth creation from high-tech divestitures

We measure the change in value to sellers and buyers of divested high-tech assets. Sellers and buyers experience favorable announcement effects in response to high-tech divestitures. However, buyers of divested high-tech assets experience more favorable announcement effects than sellers, which is opposite of the related research findings on other types of divestitures. Based on a cross-sectional analysis, the announcement effects for sellers of high-tech assets are more favorable when there is an investment bank advisor, the transaction price is disclosed, and the size of the divestiture is large. The announcement effects for buyers of high-tech assets were also more favorable when there was an investment bank advisor during the tech-bubble period. Overall, the results suggest that the stock price behavior in response to divestitures of high-tech assets is distinctly different from that of other types of divestitures.