Glamour,value and anchoring on the changing P/E

The fact that value shares outperform glamour shares in the long term has been known for over 50 years. Why then do glamour shares remain popular? The price-earnings (P/E) ratio was the first statistic documented to discriminate between the two. Using data for all US stocks since 1983, we find that glamour shares have a much greater tendency to change P/E decile than value shares. We use TreeAge decision tree software, which has not been applied to problems in finance before, to show that glamour investors cannot rationally expect any windfall as their company's P/E decile changes, whatever their horizon. We infer that glamour investors anchor on the initially high P/E value, underestimate the likelihood of change and are continually surprised. We also seek theoretical justification for why value shares tend to outperform glamour shares. No convincing arguments based on the efficient market hypothesis have been put forward to show that the outperformance of value shares might be due to their being fundamentally riskier. Here, we apply equations from option theory to show that value shares can indeed be expected to outperform glamour shares.     

Value creation and value capture under moral hazard: Exploring the micro‐foundations of buyer– supplier relationships

We combine the formalism of a principal–agent framework with a value‐based analysis in order to investigate the micro‐foundations of business partner selection and the division of value in contracting relationships. In particular, we study how the key contracting parameters such as efficiency, transactional integrity, incentive alignment, and gaming affect outcomes when buyers face competing suppliers. We show that integrity and efficiency increase value creation and capture for all parties and are complements. While incentive gaming is unambiguously bad for value creation, and reduces buyers' value capture, it can benefit some suppliers. For alignment, we find that neither party has an incentive to use fully aligned performance measures that maximize total value creation. We conclude by analyzing buyers' and suppliers' incentives to invest in integrity. Copyright © 2014 John Wiley & Sons, Ltd.     

Breeding one's own sub-prime crisis: The labour market effects on financial system stability

Crisis may spread through economy via the propagating mechanisms of the labour market - households becoming delinquent due to an initial unemployment shock may be unable to continue servicing obligations versus the financial system. With large debts - e.g. mortgages - such defaults pose a threat to financial system stability. In this paper we use the Polish household budget surveys to simulate the impact of changes in the labour market status of household members on the ability of the household to service its mortgage payments. The simulation results are subsequently aggregated to facilitate a macro-level interpretation of the findings. We simulate various scenarios of labour market deterioration. Finally, we also introduce a policy instrument into the simulations providing, in a fiscally neutral manner, additional stability to the financial system. Based on robustness checks, the findings seem to be reliable. The results suggest that even with shares of debtors among consumers as low as in Poland, the propagation mechanism may indeed result in a considerable threat, while the fiscally neutral instrument is effective and well-suited to be addressed in providing additional stability to the financial system.     

Attractiveness of augmented reality to consumers

ABSTRACT

Augmented reality (AR) may be capable of shaping the competitive advantage of companies by providing various benefits for the consumers. The aim of this article is to assess if AR is attractive to consumers and in which areas it can create the most value. Hence, we have sought to identify the most useful areas of AR applications, as well as factors influencing AR’s attractiveness. Our study finds that consumers regard AR as the most useful in the areas of education, medicine and tourism. Furthermore, we found a gap between the supply and needs of customers in terms of types of AR application offered on the market. We identified advantages and disadvantages of AR applications over their traditional counterparts impacting its adoption. Our research confirms that both hedonic and utilitarian aspects of the user experience are important for AR’s adoption.     

Which institutions encourage entrepreneurial growth aspirations?

We develop entrepreneurship and institutional theory to explain entrepreneurial growth aspirations across individuals and institutional contexts. Our framework generates hypotheses at the national level about the negative impact of higher levels of corruption, weaker property rights and greater government activity on entrepreneurs' aspirations to increase employment. We further explore whether individual's social networks compensate for weaknesses in national institutions. We use the Global Entrepreneurship Monitor surveys in 42 countries for 2001–2006, applying a multilevel estimation framework to test our ideas. We find that the relationship between growth aspiring entrepreneurs and institutions is complex; they benefit simultaneously from strong government (in the sense of property rights enforcement), and smaller government, but are constrained by corruption. Social networks mediate some but not all institutional deficiencies.     

Professionals in two employment systems

This article reports the results of a cross national study of how professional employees experience two very different employment systems: the ‘individualist’ of America and the ‘collectivist’ one of Poland. The authors conclude that further research and development of the concept of employment systems should focus on the degree of congruence between employment policies and cultural attitudes of employees.     

Simulated Negotiation Outcomes Through Recommendation Crowding

The goal of the paper is to propose a method for finding outcomes of negotiations of multiple parties with a multi-criteria decision outcomes evaluation. Firstly, the procedure for reduction of continuous set of options to large but finite crowd of compromise recommendations is presented. Next, the crowd is integrated to a single benchmark which is treated as a proposal of artificial auxiliary player called a lone wolf as presented by Kersten and Szapiro (Proceedings of the international conference of the society of systems and science. Budapest, 1987). The strategy of negotiation with this artificial player is proposed to generate a benchmark evaluations scheme for real negotiation. Finally, a multi-agent simulation approach for multi-lateral negotiation process modeling is presented in order to estimate possible negotiation outcomes.     

NegoManage: A System for Supporting Bilateral Negotiations

In this paper we present the NegoManage system, which aims at supporting the bilateral negotiation during all negotiation phases. The support includes the problem structure identification, the analysis of individual preferences of both parties, the messaging and offers exchange and the post-negotiation improvements of the agreement. The preference analysis is supported with a novel mechanism involving the specification of the classes of alternatives’ quality that represent particular levels of potential satisfaction from accepting this alternative as the negotiation solution. The consistency of preferences is also checked. The actual negotiation phase is performed in a typical way, namely the negotiators exchange multiple offers and messages. The novelty introduced in this phase is the mechanism for profiling the negotiators based on the classification of exchanged messages. The post-negotiation optimization phase employs the concept of a bargaining solution for improving the solution obtained in the previous negotiation phase. We present the way the mechanisms proposed work using simple numerical examples.     

Competition,Transparency, and Reciprocity: A Comparative Study of Auctions and Negotiations

The paper discusses experiments aimed at comparing multi-attribute reverse auctions and multi-bilateral negotiations for procuring goods with multiple attributes. Both exchange mechanisms involve a buyer purchasing from one of several sellers. Two types of negotiations are considered: verifiable and non-verifiable. They differ in the sellers’ knowledge of the current best offer on the table; in verifiable negotiations the best offer is automatically shown to every participant, which makes it similar to auctions. Online auctions and negotiation systems were used to study auction and negotiation processes, and the mechanisms’ efficiency. The results show that buyers did best using auctions, followed by non-verifiable and verifiable negotiations. We also looked into the differences between auctions and negotiations in terms of their duration, sellers’ and buyers’ involvement, and efficiency and conclude that the behavior of buyers and sellers cannot be explained solely on the grounds of traditional economics. It can, however, be explained on the grounds of social exchange theory and behavioral economics. In multi-bilateral negotiations competition and social behavior coexist. When transparency is introduced the social effect becomes stronger, weakening the impact of competition.