The role of future economic conditions in the cross-section of stock returns: Evidence from the US and UK

Our study investigates the explanatory power of future economic conditions on individual stock returns in the US and UK equity markets. We analyse a new trading strategy that is based on rational forecasts of future real activity. In addition, we specifically examine the performance of this trading strategy applied to two different classifications of stocks – procyclical stocks and countercyclical stocks. Our findings indicate a strong persistence in the relationship between returns on pro-cyclical stocks and the business cycle. However, such persistence is not present when moving to counter-cyclical stocks in the US and the UK. From this we suggest that US and UK equity investors who predict future real activity accurately can improve their investment profitability by longing pro-cyclical stocks when they expect future economic conditions to be above the long-run trend and shorting those stocks when future activity is anticipated to be below the steady state.     

Decision making by specialist luxury travel agents

We report an ethnographic study of specialist travel agents in luxury wildlife tourism. Agents consider 30 factors in 5 groups, related to client, destination, attraction, operator and agent. They consider the groups in sequence rapidly and intuitively. They are driven by a powerful regard for the high expectations of wealthy clients, and a sense of responsibility to the clients, but they assume authority over the decision. They rely on personal experience with each particular place and tourism product, and sell only what they know. One of their skills is to project themselves into the client's perspective so as to imagine a trip in great detail. This process contrasts strongly with the explicit deterministic approach used by retail travel agents in high-volume lower-priced subsectors, where earnings are driven by commission and incentive structures. For high-end agents, establishing long-term relationships of mutual trust with individual clients and tour operators is paramount.     

The expected retail customer: Value co-creator,co-producer or disturbance?

The purpose of this paper is to explore expectations among front-line employees regarding their customers and how these expectations can be understood in relation to strategies of customer participation and value co-creation. Two categories of expectations are identified; operative and interactive. In particular, the operative expectations reveal a service practice that is heavily structured by large-scale systems and ideals of rational efficiency. It is argued that co-creation needs to be discussed on both the strategic level, i.e. in terms of what the “customer”/market wants, and on the operative level, where the customer's direct contribution to the value-creating process has its focus.     

“(S)he’s so hearty”: Gender cues,stereotypes, and expectations of warmth in peer-to-peer accommodation services

The hospitality industry is witnessing continuous growth in the number of female travellers and female hosts available to accommodate travellers in their properties using peer-to-peer (P2P) service platforms. Cues that convey information about the host’s gender are therefore acquiring notable relevance. Tourism research, however, has not yet devoted attention to this phenomenon. To fill this gap, the present paper investigates whether and how gender cues conveyed on P2P accommodation platforms affect users’ expectations and booking intentions. Across three experimental studies, the paper demonstrates that such cues affect users’ expectations in a P2P accommodation context, but not in a hotel accommodation context. In particular, regardless of the hosts’ race, female cues, compared to male cues, appear more able to create expectations of warmth and this effect is evident for users who have a strong gender stereotyping tendency. Importantly, enhanced expectations of warmth exert a positive influence on users’ reservation intentions.     

Structural breaks, parameter uncertainty, and term structure puzzles

We show that uncertainty about parameters of the short rate model can account for the rejections of the expectations hypothesis for the term structure of interest rates. We assume that agents employ Bayes rule to learn parameter values in the context of a model that is subject to stochastic structural breaks. We show that parameter uncertainty also implies that the verdict on the expectations hypothesis varies systematically with the term of the long bond and the particular test employed, in the same way that is found in empirical tests.     

Shaping long-run expectations in problems of coordination

When far-sighted agents may adjust their behavior only gradually, the issue of equilibrium selection becomes one of tension between history and expectations. This paper analyzes whether, in this context, a government policy maker may intervene successfully and redirect expectations away from the inertia of undesired history. The possibilities and limitations of such an approach to `expectation management' are studied within a game-theoretic framework which involves both the government and the population.     

Behind the black box: a survey of real-world investment appraisal approaches

This paper assesses business investment appraisal techniques and expectations formation. The paper begins with a comparative analysis of the links between fixed asset investment theories and real world investment appraisal techniques, focusing on the underlying assumptions about rationality and expectations. In the empirical sections, these ideas are tested via an analysis of business behaviour based upon survey evidence from a sample of Cambridgeshire manufacturing firms. The statistical analysis focuses on hypothesis testing, ordered probit estimations and simulations. The evidence presented reveals that whilst conventional production function analysis does provide some explanatory power in describing the objective determinants of firm investment activity, subjective and behavioural factors are also important.The author is grateful to Geoff Harcourt, Philip Arestis and an anonymous referee for their encouraging advice and suggestions.     

Examining the relationships among background variables and academic performance of first year accounting students at an Irish University

The study reported on in this paper examined the associations among prior academic achievement, prior knowledge of accounting, gender, motives, expectations and preparedness for higher education and academic performance in the first year of an accounting program at an Irish university. Data regarding the background variables were gathered using a questionnaire and examination marks were used to as measures of academic performance. Results indicate a significant association among prior academic achievement, prior knowledge of accounting, and students’ academic performance. Additionally, students’ confidence in their skills and abilities, perceptions regarding the role of university in career development, positive prior experiences of learning accounting, and a desire to experience intellectual growth are all significant variables in explaining variation in first year academic performance. Interestingly, the opportunity provided by university to broaden one’s horizons (motive) and a willingness to ask for help from lecturers (preparedness) were found to be negatively associated with performance.     

Retirement expectations, pension reforms, and their impact on private wealth accumulation

We estimate the effect of pension reforms on households' expectations of retirement outcomes and private wealth accumulation decisions exploiting a decade of intense Italian pension reforms as a source of exogenous variation in expected pension wealth. The Survey of Household Income and Wealth, a large random sample of the Italian population, elicits expectations of the age at which workers expect to retire and of the ratio of pension benefits to pre-retirement income between 1989 and 2002. We find that workers have revised expectations in the direction suggested by the reform and that there is substantial offset between private wealth and perceived pension wealth, particularly by workers that are better informed about their pension wealth.