Selling winners, holding losers: Effect on fund flows and survival of disposition-prone mutual funds

Recent studies suggest that presence of a disposition effect in a large subset of investors can create stock mispricings, which has serious implications for market efficiency. We examine whether US equity mutual funds are disposition-prone, how that effect influences performance, investor flows and fund survival, and whether the disposition orientation of mutual funds affects stock prices in a sustained manner.We find that about 30% of all funds exhibit some degree of disposition behavior and that such funds underperform funds that are not disposition-prone by 4-6% per year. Moreover, after controlling for performance, tax overhang and other factors that potentially affect flows, disposition-prone funds attract significantly smaller flows than other funds. The results suggest that mutual fund investors are smart enough to minimize investment in disposition-prone funds. Consequently, disposition-prone funds have significantly higher rates of failure than other funds, thereby reducing the impact of such trading behavior on security prices.     

An analysis of e-business adoption and its impact on business performance

Across industries, firms have adopted e-business initiatives to better manage their internal business processes as well as their interfaces with the environment. In this study, a unified framework that captures the antecedents of e-business adoption, adoption intensity, and performance outcomes is proposed and empirically tested using data collected from senior managers in four technology-intensive industries. Applying a framework that captures the intensity of e-business adoption across four business process domains, the authors find that the antecedents and performance outcomes of e-business adoption are best studied in a process-specific context. They find, for example, that while the communication and internal administration aspects of e-business positively affect performance outcomes, the more high-profile activities related to online order taking and e-procurement do not. The authors' findings provide the foundation for a more rigorous study of e-business. Fang Wu (fangwu@msu.edu) (Ph.D., University of Texas at Austin) is an assistant professor of marketing at the Eli Broad College of Business, Michigan State University. Her current research interests include e-business adoption strategy, knowledge transfer in new product alliances, interfirm learning dynamics, and marketing knowledge management. Vijay Mahajan (vijay.mahajan@bus.utexas.edu) (Ph.D., University of Texas at Austin) is the John P. Harbin Centennial Chair in Business and a professor of marketing at the McCombs School of Business, University of Texas at Austin, and dean of the Indian School of Business at Hyderabad, India. He has written extensively on product diffusion, marketing strategy, and marketing research methodologies. He has written and/or edited eight books. His research appears in journals such as theJournal of Marketing Research, theJournal of Marketing, Marketing Science, Management Science, andHarvard Business Review. He has received the Best Research Paper Award from theJournal of Retailing (1982, 1985), theJournal of Marketing (Maynard Award, 1990), and theInternational Journal of Research in Marketing (Prentice Hall Award, 1995). He also received the American Marketing Association (AMA) Charles Coolidge Parlin Marketing Research Award (1997) and the AMA Marketing Research Special Interest Group Gilbert Churchill Award in 1999, recognizing lifetime achievement in marketing research. Sridhar Balasubramanian (balasubs@bschool.unc.edu) (Ph.D., Yale University) is an assistant professor of marketing at Kenan-Flagler, the University of North Carolina Business School. His research interests cover multiple areas including marketing strategy, channel portfolio management, e-commerce and m-commerce, direct marketing and customer relationship management, game theory and the management of competition, digitization, and strategic compensation. His research has been published or is forthcoming in journals such asMarketing Science, Management Science, Statistica Neerlandica, theInternational Journal of Electronic Commerce, Decision Support Systems, and theJournal of Retailing. He received the John D. C. Little Award for 1998 from the Institute for Operations Research and the Management Science (INFORMS) for the best marketing paper inMarketing Science andManagement Science. He has worked as a marketing strategy adviser to start-up companies and served as guest coeditor of the Centennial Issue of theJournal of Retailing.     

Market Segmentation Research: Beyond Within and Across Group Differences

Market segmentation research is currently focused too narrowly on the task of segment identification as opposed to its strategic relevance within a firm. In this paper we distinguish an ex ante approach to market segmentation research, which begins with studying the motivating conditions that lead people to the tasks and interests in their lives, from an ex post approach which begins with an individual's reaction to marketplace offerings. We argue that the marketing task of guiding managements to make what people will want to buy will be more successful in light of a deep understanding of behavior in the context of everyday life and work, rather than a detailed understanding of preferences in the marketplace. Directions for future research are discussed.     

The evolution of educational inequalities through secondary school: Evidence from a South African panel study

Schooling outcomes in South Africa are characterised by significant inequalities on the basis of race and socio-economic status. This paper reports on findings from a unique panel dataset that follows individuals who participated in the Trends in International Mathematics and Science Study in 2002 as Grade 8 students through to their secondary school-leaving examination (known as ‘matric’) in Grade 12. The paper investigates the extent to which secondary schools differ in converting Grade 8 achievement into matric outcomes. Achievement in Grade 8 is strongly predictive of survival to matric, passing matric and performance in matric. Many students had extremely weak mathematical proficiency in Grade 8 and yet decided to take matric mathematics, only to fail the subject. Increasing the number of matric mathematics passes is a strong policy imperative. Our analysis suggests that the way to achieve this is to improve mathematics learning at earlier stages of the school programme rather than through indiscriminate mathematics participation in matric.     

Positioning of Financial Services for Competitive Advantage

The financial services sector is becoming increasingly competitive. Deregulation allows formerly nonoverlapping financial institutions to compete. To survive and succeed, financial institutions must develop strong positions. A position summarizes the distinctive competence that a company seeks to convey to the marketplace to establish its competitive advantage. In this article, Christopher Easingwood and Vijay Mahajan describe a number of positioning attempts in the financial services sector. They are guided by two central objectives.
The first is to show how the special characteristics of services give rise to eight different positioning possibilities for financial services organizations. These positions present a range of potential options from which the manager may choose. For instance, an "extra service" position is one option, a "performance" position is another.
The second objective is to demonstrate the use of the positioning framework, with examples taken from the insurance sector to provide illustrations rather than a complete picture of insurance positioning.
The article concludes with a number of recommendations. For instance, financial institutions should avoid overcrowded positions and occupy underexploited positions. If accepted, these recommendations should help the financial services executive develop a competitive positioning strategy.     

New Product Models: Practice, Shortcomings and Desired Improvements

Vijay Mahajan and Jerry Wind report the results of a study conducted to assess the role of new product models in supporting and improving the new product development process. The study focused on current industry practice in deciding which models and methods to use, their shortcomings and desired improvements. The results have implications for developers, suppliers and users of new product forecasting models. The article concludes with a research and implementation agenda to further foster and benefit from advances in new product models.     

The Price Response to S&P 500 Index Additions and Deletions: Evidence of Asymmetry and a New Explanation

We study the price effects of changes to the S&P 500 index and document an asymmetric price response: There is a permanent increase in the price of added firms but no permanent decline for deleted firms. These results are at odds with extant explanations of the effects of index changes that imply a symmetric price response to additions and deletions. A possible explanation for asymmetric price effects arises from the changes in investor awareness. Results from our empirical tests support the thesis that changes in investor awareness contribute to the asymmetric price effects of S&P 500 index additions and deletions.     

The objectives of financial statements: An empirical study of the use of cash flow and earnings by security analysts

The Financial Accounting Standards Board (FASB) has tentatively accepted that cash flows to the enterprise are the major focus of financial statements. This article highlights the importance with which security analysts view earnings information and cash flow information in compiling their professional reports.