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Article
Publication date: 9 October 2017

Jörgen Hellström, Rickard Olsson and Oscar Stålnacke

The purpose of this paper is to measure individual investors’ expectations of risk and return and to evaluate different expectation measures.

Abstract

Purpose

The purpose of this paper is to measure individual investors’ expectations of risk and return and to evaluate different expectation measures.

Design/methodology/approach

The authors measure individual investors’ expectations of risk and return regarding an index fund and two stocks using survey data on a random sample of individual investors in Sweden. The survey contains three different return and four different risk expectation measures. To evaluate the different expectation measures, three different evaluation perspectives are considered.

Findings

The risk expectations obtained from the different measures are positively correlated across respondents, but their average magnitudes differ considerably across measures. The return expectations are also positively correlated, and their magnitudes also differ, but to a lesser extent. Consequently, the same individual can express risk expectations that either underestimate or overestimate the forward risk, depending on the measure that is used. The variations in the expectations mainly relate to differences in the responses to the questions underlying the different measures, rather than to the methods used to obtain the expectations. The results from the evaluation of the measures indicate that the expectation measure proposed by Dominitz and Manski (2011) is the only measure for which it is possible to distinguish between individuals’ expectations, using all three of the evaluation perspectives.

Originality/value

This is, to the best of the authors’ knowledge, the first paper that evaluates different survey measures of individual investors’ expectations of risk and return.

Details

Review of Behavioral Finance, vol. 9 no. 3
Type: Research Article
ISSN: 1940-5979

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Article
Publication date: 24 May 2019

Oscar Stålnacke

The purpose of this paper is to investigate the relationship between individual investors’ level of sophistication and their expectations of risk and return in the stock market.

Abstract

Purpose

The purpose of this paper is to investigate the relationship between individual investors’ level of sophistication and their expectations of risk and return in the stock market.

Design/methodology/approach

The author combines survey and registry data on individual investors in Sweden to obtain 11 sophistication proxies that previous research has related to individuals’ financial decisions. These proxies are related to a survey measure regarding individual investors’ expectations of risk and return in an index fund using linear regressions.

Findings

The findings in this paper indicate that sophisticated investors have lower risk and higher return expectations that are closer to objective measures than those of less-sophisticated investors.

Originality/value

These results are important, since they enhance the understanding of the underlying mechanisms through which sophistication can influence financial decisions.

Details

Review of Behavioral Finance, vol. 11 no. 1
Type: Research Article
ISSN: 1940-5979

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Article
Publication date: 22 January 2021

Xiaofei Li, Baolong Ma and Hongrui Chu

The value of online reviews has been well documented by academics and practitioners. However, to maximise the benefits of consumer reviews, online sellers must avoid the…

Abstract

Purpose

The value of online reviews has been well documented by academics and practitioners. However, to maximise the benefits of consumer reviews, online sellers must avoid the negative consequences associated with customer feedback, such as reputation loss, or product returns after purchase. In developing a better understanding of the relationships between online reviews and their potential for negative impacts, this research aims to explore product returns. Through a quantitative model, this research demonstrates why online reviews can result in product return behaviours.

Design/methodology/approach

The hypotheses were tested via two studies. In Study 1, the authors examine the direct effects of review valence and review volume on product returns by analysing secondary data on 4,995 stores on China's Taobao.com. Study 2 further extends and validates the findings of Study 1 with a survey sample of 795 participants across several online shopping platforms. This analysis examines the mechanics and conditions that influence the relationships between online reviews and product returns through partial least squares-structural equation modelling (PLS-SEM).

Findings

The results show that both review valence (i.e. average star ratings) and the number of reviews can increase the probability of product returns due to the high expectations that result from positive online reviews. Further, the effect of review valence on product returns is stronger for first-time purchasers at a store. In terms of mitigation, the analysis shows that bilateral communications between sellers and buyers can temper the unrealistic expectations set by positive reviews, leading to fewer product returns.

Originality/value

This research adds to the literature on online reviews by exploring the negative consequences of online reviews and the role they play in online purchasing decisions. The findings also provide direct evidence as to why online reviews can result in more product returns, adding clarity to extant research which contains conflicting conclusions as to how online reviews affect product return behaviours.

Details

Asia Pacific Journal of Marketing and Logistics, vol. 33 no. 8
Type: Research Article
ISSN: 1355-5855

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Article
Publication date: 1 December 2005

Rebecca Abraham

To test the Miller Price Optimism Model using a new proxy for heterogenous expectations and to examine if high differential stocks behave like glamour stocks and low…

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1900

Abstract

Purpose

To test the Miller Price Optimism Model using a new proxy for heterogenous expectations and to examine if high differential stocks behave like glamour stocks and low differential stocks behave like value stocks.

Design/methodology/approach

Whisper/analyst forecast differentials were measured for a sample of stocks, combined into portfolios and held for one month. If the Miller model was supported, high differential stocks were expected to have lower portfolio returns than low differential stocks due to the greater divergence between optimistic whisper forecasts and rational analysts consensus forecasts.

Findings

High differential quintiles had significantly lower future returns than low differential quintiles supporting the Miller model. High differential stocks resembled glamour stocks while low differential stocks behaved like value stocks.

Research limitations/implications

These results pertain to the ultra‐short time horizon of two months prior to the earnings announcement. Future research should replicate this study for a longer 3‐12 month time horizon.

Practical implications

Ultra short‐term investors should hold glamour stocks and long term investors should hold value stocks. Rising volatility suggests that investors should define the time horizon for holding assets.

Originality/value

It is one of only two studies that directly uses earnings forecasts as a proxy for heterogenous expectations. It adds to the sparse literature on whisper forecasts. It may be used by academicians studying price optimism effects and institutional investors following stock returns during earnings announcements.

Details

Journal of Economic Studies, vol. 32 no. 6
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 14 December 2015

Thomas L. Powers and Eric P. Jack

The distribution literature provides support for examining product returns from a customer-based perspective. Based on this need, the purpose of this paper is to identify…

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2228

Abstract

Purpose

The distribution literature provides support for examining product returns from a customer-based perspective. Based on this need, the purpose of this paper is to identify the underlying causes of product returns based on a survey of 308 Wal-Mart and Target customers who engaged in product returns.

Design/methodology/approach

Structural equation modelling was used to verify and test the relationships examined.

Findings

It was found that dissatisfaction with a product results in an emotional dissonance that is positively related to product returns. Two primary reasons for return were examined, the expectation of the customer not being met and the customer finding a better product or price. Both reasons for return were found to influence the frequency of returns. It is also reported that gender, but not store brand moderated these relationships. Males had higher levels of product dissatisfaction and subsequent emotional dissonance than females. Males however did not have higher rates of return than females.

Originality/value

The research provides new knowledge in the management of retail returns by identifying their underlying causes as well as specific reasons for returns. This knowledge can assist managers in identifying the behavioural influences on product returns and in developing methods to minimize those returns.

Details

International Journal of Retail & Distribution Management, vol. 43 no. 12
Type: Research Article
ISSN: 0959-0552

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Article
Publication date: 10 August 2010

Merve Bener and Keith W. Glaister

The purpose of this paper is to investigate the determinants of IJV performance expectations for a sample of international joint ventures with parent firms from Europe…

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2152

Abstract

Purpose

The purpose of this paper is to investigate the determinants of IJV performance expectations for a sample of international joint ventures with parent firms from Europe, North America and Australia. A conceptual framework is proposed which identifies the determinants of IJV performance as the dominant control of the IJV by one parent firm, the level of autonomy granted to the IJV management, the level of trust between the partner firms, the effect of differences in the national cultures of IJV partners and the differences in the organizational cultures of IJV partners.

Design/methodology/approach

The study adopts a self‐administered questionnaire approach to examine the determinants of performance in the sample firms. The starting point for obtaining a sample of parent firms was the OSIRIS database. Paper copies of the questionnaires were posted to potential respondents. This was followed by an e‐mail to the same potential respondents with the questionnaires attached. In total, 109 usable questionnaires were obtained from respondent companies – 22 questionnaires were returned from the postal survey and 87 questionnaires were returned from the follow‐up e‐mail.

Findings

Predicted positive relationships between performance expectations and dominant control of the IJV, autonomy granted to the IJV management, and trust between the partner firms are supported by the data. The predicted negative relationship between performance expectations and national culture differences was not supported, however, the expected negative relationship between performance expectations and corporate culture differences was partially supported.

Originality/value

This study adds to the international business literature on IJVs and provides new empirical evidence in the context of Europe, North America and Australia.

Details

Journal of Strategy and Management, vol. 3 no. 3
Type: Research Article
ISSN: 1755-425X

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Article
Publication date: 1 August 2002

Charlotte Lauer

This study applies to German data a model in which the decision to attend higher education depends on the ratio of marginal cost and marginal return expected from higher…

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1882

Abstract

This study applies to German data a model in which the decision to attend higher education depends on the ratio of marginal cost and marginal return expected from higher education. If this ratio is below a certain threshold, the individual will choose to participate in higher education. In a simulation exercise, the impact of selected variables on this threshold, and thus on the participation probability, is quantified. The results suggests the presence of financial constraints binding participation in higher education and that the participation decision responds to some extent to return expectations in terms of labour market outcome and to financial incentives such as student support.

Details

International Journal of Manpower, vol. 23 no. 5
Type: Research Article
ISSN: 0143-7720

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Article
Publication date: 1 February 1996

L. David Weller

Argues that the quest for quality is international in scope, with many nations adopting the total quality management (TQM) principles as a way of achieving educational…

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1578

Abstract

Argues that the quest for quality is international in scope, with many nations adopting the total quality management (TQM) principles as a way of achieving educational reform. Early indicators of TQM’s success are increases in student achievement, student self‐concept and teacher morale. However, quality programmes are not free and the concept of accountability is ever‐present in the minds of stakeholders who demand positive returns on their investments. Without a means to demonstrate successful returns on quality investments, public support and confidence in the schools may drastically decrease and TQM may be perceived as too expensive for public support. For those implementing TQM, the question is: how do I demonstrate the return on quality investments? The answer lies in measurement. This involves assessing customer need and expectations; producing quality outputs which meet or exceed customer satisfaction, and then documenting these returns by directly linking quality education outputs with the inputs of time, money, and effort.

Details

International Journal of Educational Management, vol. 10 no. 1
Type: Research Article
ISSN: 0951-354X

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Article
Publication date: 1 June 2002

Charlotte Lauer

This article analyses the determinants of participation in higher education in Germany, with a particular focus on the role of expectations regarding the cost and the…

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1663

Abstract

This article analyses the determinants of participation in higher education in Germany, with a particular focus on the role of expectations regarding the cost and the return of higher education. The results show that the enrolment probability is mainly influenced by social origin, even though it also depends on cost and return expectations. In particular, a high unemployment risk and a high expected wage premium seem to increase the enrolment probability, while a higher propensity of non‐ or part‐time employment decreases it. Moreover, extending the coverage of public financial support seems to be more efficient in increasing enrolments than raising the amount granted per beneficiary.

Details

Education + Training, vol. 44 no. 4/5
Type: Research Article
ISSN: 0040-0912

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Book part
Publication date: 25 October 2021

Renaud du Tertre

This chapter considers financial instability as a phenomenon endogenous to the functioning of capitalism. Consequently, it seeks to identify the main sources and different…

Abstract

This chapter considers financial instability as a phenomenon endogenous to the functioning of capitalism. Consequently, it seeks to identify the main sources and different forms of the latter in financialised capitalism. According to Keynes, capital assets prices are conceived as the expression of financial conventions. It is, therefore, important to distinguish between the returns expected by company directors, bankers, holders of equity titles, risk-takers and, in contrast, risk-averse holders of debt securities. Minsky enriches the analysis by attributing a decisive role to the leverage effect, at the origin of an accumulation of financial weaknesses in the balance sheets of non-financial agents during the expansion phases preceding financial crises. Regulation theory leads to the introduction of a distinction between the financial accelerator and the leverage effect. The first establishes a procyclical relationship at the macroeconomic level between the price of capital assets and the debt ratio of non-financial agents; the second acts at the microeconomic level through shareholder corporate governance, which determines the institutional conditions inciting firm directors to integrate shareholder expectations into their return forecasts. The empirical analysis identifies three forms of financial instability in financialised capitalism: the long-term financial cycle governed by the debt ratio of non-financial agents; the business cycle governed by the impact of stock prices on investment; and the short-term or even very short-term expected return revisions of financial actors. Its originality is to show that these three forms of instability acquire different characteristics depending on the national economy considered.

Details

Rethinking Finance in the Face of New Challenges
Type: Book
ISBN: 978-1-80117-788-7

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