Q‐FACTORS IN EMPIRICAL ASSET PRICING: A REVIEW AND SYNTHESIS

The latest development in the asset pricing literature is the emergence of empirical asset pricing models comprising q‐factors (profitability and investment factors) in conjunction with other factors. However, as in the case of the older empirical models, there is scepticism regarding the application of these newer factor models consisting of q‐factors because of the debate surrounding the explanatory power of these empirically inspired asset pricing models. This review attempts to synthesize studies pertaining to the four alternative explanations of the asset pricing models comprising the q‐factors (profitability and investment) – the data snooping hypothesis, the risk‐based explanation, the irrational investor behaviour explanation and the interpretation that suggest that the combination of the risk‐free asset and the factors comprising the model span the mean‐variance efficient tangency portfolio that prices the universe of assets.     

The impact of mentoring quality on protégés' organization‐based self‐esteem and proactive behavior: The moderating role of traditionality

Based on self‐consistency theory, this study examined the relationship between mentoring quality as perceived by protégés and protégés' proactive behavior. It focused on the mediating role of organization‐based self‐esteem (OBSE) and the moderating role of traditionality. To examine these relationships, we administrated three‐wave surveys to 237 subordinate–supervisor dyads in a construction enterprise. The results of hierarchical linear modeling demonstrated that (a) mentoring quality and proactive behavior had a positive relationship; (b) OBSE mediated this relationship; and (c) traditionality strengthened both the relationship between mentoring quality and OBSE and the indirect effect of mentoring quality on proactive behavior via OBSE. Our findings have theoretical and practical implications for research on mentoring and proactive behavior.     

The financialization of the non‐financial corporation. A critique to the financial turn of accumulation hypothesis

One aspect in which non‐financial corporations (NFCs) are said to be financialized is that they have been increasingly engaged in financial accumulation from which they derive a growing proportion of financial income. This is what we call the financial turn of accumulation hypothesis. In this article, we show that the evidence used to sustain it, in the U.S. setting, has to be reconsidered. Our findings show that, contrary to the financial turn of accumulation hypothesis, financial income averages 2.5% of NFCs’ total income since the 1980s, oscillating since the beginnings of the 1990s until 2005 and then declining. In terms of assets, some of the alleged financial assets might actually reflect other activities in which NFCs have been increasingly engaged, such as tax avoidance, internationalization of production, activities refocusing and M&As.     

Response to Vuori and Vuori's commentary on “Heuristics in the strategy context”

We recently introduced a research program on how firms can effectively capture fleeting opportunities using heuristics. Heuristics, we advocate, are the essence of strategy, especially in unpredictable markets where opportunities are often numerous, fast moving, and uncertain. Our emphasis on heuristics invites comparison with prominent research programs in cognitive psychology. We address this opportunity by comparing our “simple rules” heuristics approach with “heuristics‐and‐biases” and “fast‐and‐frugal” heuristics research. Collectively, the three approaches offer a rich understanding of heuristics. Copyright © 2014 John Wiley & Sons, Ltd.     

Trust over time in exchange relationships: Meta‐analysis and theory

A common premise in prior research is that trust increases over time in relationships. Through a meta‐analysis of 39 studies, we find that the bivariate correlation between trust and relationship duration (1) is on average positive and small, and (2) varies significantly across studies indicating the presence of unobserved moderators. We therefore build a theoretical framework to specify four different mechanisms—initial bias correction, change in relationship value, identification, and trust‐based selection—that may affect the development of trust. We then argue that the relative strength of these mechanisms should influence whether trust increases, remains constant, or decreases over time. © 2013 The Authors. Strategic Management Journal published by John Wiley & Sons Ltd.     

Competing technologies and industry evolution: The benefits of making mistakes in the flat panel display industry

This article investigates the post‐entry implications of pre‐entry technological choices made during the uncertain period before a dominant design. Building on work on technological dynamics and organizational inertia, I argue that too early commitments to the winning technology may impede the ability to bring the best product to market, but delaying investment too long limits the ability to accumulate useful knowledge. Using data from the evolution of the flat panel display industry from 1965 to 2005, the study shows empirical support for the two theoretical mechanisms and offers the surprising result that firms starting in the losing technology before switching outperform other firms in terms of product value. Switching, while difficult behaviorally in recovering from failure, both delays difficult‐to‐reverse technological commitments and develops market knowledge. Copyright © 2013 John Wiley & Sons, Ltd.     

IPO first‐day returns: Skewness preference,investor sentiment and uncertainty underlying factors

In this paper, we investigate the initial public offering (IPO) first-day returns. Our focus is to examine the irrational component of the agent behavior towards IPO lotteries. Based on 234 French IPOs performed between 2002 and 2012, we find that IPOs with high initial returns have higher idiosyncratic skewness, turnover and momentum. This finding provides empirical evidence for investors' preference for stocks with lottery-like features and investor sentiment. In addition, we show that the skewness preference and the investor sentiment effect are stronger during periods of favorable market conditions. Our results are robust to the integration of uncertainty underlying factors.     

Sharing the value‐at‐risk under distributional ambiguity

This paper considers the problem of risk sharing, where a coalition of homogeneous agents, each bearing a random cost, aggregates their costs, and shares the value‐at‐risk of such a risky position. Due to limited distributional information in practice, the joint distribution of agents' random costs is difficult to acquire. The coalition, being aware of the distributional ambiguity, thus evaluates the worst‐case value‐at‐risk within a commonly agreed ambiguity set of the possible joint distributions. Through the lens of cooperative game theory, we show that this coalitional worst‐case value‐at‐risk is subadditive for the popular ambiguity sets in the distributionally robust optimization literature that are based on (i) convex moments or (ii) Wasserstein distance to some reference distributions. In addition, we propose easy‐to‐compute core allocation schemes to share the worst‐case value‐at‐risk. Our results can be readily extended to sharing the worst‐case conditional value‐at‐risk under distributional ambiguity.     

Unequal but essential: How subsistence consumer–entrepreneurs negotiate unprecedented shock with extraordinary resilience during COVID‐19

We use qualitative interviews to study subsistence consumers confronting the global, pervasive and extended challenges of COVID‐19, encompassing literally all realms of daily life. For subsistence consumers whose circumstances are filled with day‐to‐day uncertainty and a small margin of error to begin with, the pandemic has led to manifold uncertainties and a disappearing margin of error, with potentially lethal consequences. Their constraints to thinking and lack of self‐confidence arising from both low income and low literacy are magnified in the face of the complex, invisible pandemic and the fear and panic it has caused. Characteristic relational strengths are weakened with social distancing and fear of infection. Yet, subsistence consumers display humanity in catastrophe, and confront the uncontrollable by reiterating a higher power. Consumption is reduced to the very bare essentials and income generation involves staying the course versus finding any viable alternative. We derive implications for consumer affairs.     

Electricity awareness and consumer demand for information

With the envisioned growth in the residential electricity demand and increased share of intermittent renewables in the supply mix, consumers will need to be better informed about their electricity consumption and to play an active role in managing their electricity use. However, consumer inattention and lack of information are ubiquitous, especially in household energy‐related settings. Thus, using a novel survey and actual monthly electricity consumption data, this study set out to measure the level of awareness about electricity bills, prices and costs among some Finnish households—as captured by the answers to six questions—and to investigate whether higher levels of “electricity awareness” are associated with electricity savings. In addition, this study analyses the willingness to receive extra information about energy consumption and savings and how it differs between “electricity aware” and “electricity unaware” respondents. The results indicate low levels of “electricity awareness” among the respondents of the survey. Compared to the respondents with little knowledge about electricity bills, prices and costs, the respondents with higher levels of “electricity awareness” tend to consume less electricity. Higher levels of awareness about electricity use and consumption might “materialize” inconspicuous consumption patterns, as opposed to more general facts about the largely invisible environmental consequences of everyday practices. More than two‐thirds of the total number of respondents would like to receive additional information about energy consumption and how to save energy. However, there exists a significant portion of “electricity unaware” respondents who are not only unwilling to receive such information, but are also unaware of their own knowledge deficits. To maximize the impact of any information strategy, decision makers should attempt to engage with this type of consumer; by becoming more aware of their knowledge deficits, people might become more receptive to information that can benefit them.