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What if companies try to combine the IKEA and Trophy winner effects? The purpose of this study is to understand the similarities and differences between both effects. This is not only theoretically but also practically important for the way that companies interact with their customers.

Successful work – invested either to create or to obtain a product – increases the customers’ valuation of the product. This phenomenon known as the IKEA or Trophy winner effect. This study directly compares both effects using experiments with two different products (paper planes and 3D puzzles). Moreover, this study tests whether they reinforce each other.

The Trophy winner effect looms larger than the IKEA effect for inexpensive items. For slightly more expensive products, this study finds a Trophy loser effect. Positive emotions of trophy winners drive the results for inexpensive products, whereas negative emotions of trophy losers drive the results for slightly more expensive products.

The relevance of the IKEA and Trophy effects is influenced by the type of product. Customers’ labor invested in the product itself is of greater importance the more expensive the product is. As soon as customers interpret the interaction with other customers as competition, the effect on valuation can be substantial even for inexpensive products. Future studies could try to replicate our results with different product categories.

Although the IKEA and Trophy effects are no new phenomena in consumer psychology and behavioral economics, they have not been compared to each other or combined yet. The results are useful for researchers and practitioners alike. They yield implications for product customization and customer empowerment.

This chapter analyzes the aggregate performance of Home Run Derby competitors’ performance both before and after the Home Run Derby for the time period 1999–2013. Regression to the mean suggests that in general, those players with outstanding performances in the first half of the season will regress to the mean. The findings here are consistent with regression to the mean, and the mean performance along four key analytics is statistically significantly worse for the competitors. However, the winners’ mean performance both before and after the Home Run Derby are not statistically significantly different. Thus, the results are consistent with previous research, but the results also find so-called “winner and loser” effects in Major League Baseball.

Expectations ostensibly lead to the formation of hierarchies, and hierarchies are thought to improve coordination. A simulation model is introduced to determine whether expectations directly improve coordination.

Agent-based simulations of small group behavior are used to determine what rules for expectation formation best coordinate groups. Within groups of agents that have differing but unknown task abilities, pairs take turns playing a coordination game with one another. The group receives a positive payoff when one agent chooses to take a high-importance role (leader) and the other chooses a low-importance role (follower), where the payoff is proportional to the ability of the “leader.” When both individuals vie to be leader, a costly conflict gives the group information about which agent has a higher task-ability.

The rules governing individuals’ formation of expectations about one another often lead to coordination that is suboptimal: They do not capitalize on the differential abilities of group members. The rules do, however, minimize costly conflicts between individuals. Therefore, standard rules of expectation formation are only optimal when conflicts are costly or provide poor information.

Rules that govern the formation of expectations may have served an evolutionary purpose in guiding individuals towards coordination while minimizing conflict, but these psychologically hardwired rules lead to suboptimal hierarchies.

This paper looks at how well empirically observed expectation-generating rules lead to group coordination by adding a game theoretic conception of interaction to the e-state structuralism model of hierarchy formation.

This paper aims to investigate whether idiosyncratic volatility is priced in returns of equity funds while controlling for fund size and return momentum.

Following Fama and French (1993), an idiosyncratic volatility mimicking factor and a fund-size factor are constructed. The pricing ability of this idiosyncratic volatility mimicking factor is investigated in the context of Carhart (1997).

Idiosyncratic volatility is an important pricing factor even when controlling for fund size and momentum. In addition, idiosyncratic volatility is strongly and positively associated with the momentum effect. Further, when controlling for the association between the momentum effect and idiosyncratic volatility, the explanatory power of the momentum factor almost disappears, which suggests the pricing of idiosyncratic volatility mediates momentum and returns.

These findings imply that both the idiosyncratic volatility factor and the fund-size factor should not be ignored by fund managers when evaluating the performance of the equity funds.

This paper demonstrates how economic field experiments may offer researchers a method to quickly assess policy outcomes that otherwise are difficult to measure. We compare lottery winners to losers of a privately run educational voucher program to measure the program’s effect on confidence. We measure confidence on academic ability using protocols developed to assess the educational program. We find that confidence does not differ robustly between winners and losers. Among non African-Americans, however, winners were significantly less overconfident than losers in predicting their academic achievement test scores. We also find older children are significantly more confident in their abilities.

This study disentangles the investor-base effect and the information effect of investor attention. The former leads to a larger investor base and higher stock returns, while the latter facilitates the dissemination of information among investors and impacts informational trading.

Using positive volume shocks as a proxy for increased investor attention, this study evaluates the impacts of the investor-base effect and the information effect of investor attention on market correction following extreme daily returns in the US stock market from 1966 to 2018.

This study finds that the investor-base effect increases subsequent returns of both daily winner and daily loser stocks. The information effect leads to economically less significant return reversals for both the daily winner and daily loser stocks. These two effects tend to have economically more significant impacts on the daily loser stocks. The economic significance of these two effects is also related to firm size and the state of the stock market.

This study is the first to disentangle the investor-base effect and the information effect of increased investor attention. The evidence that the information effect facilitates the dissemination of new information and impacts stock returns contributes to the strand of studies on the impact of investor attention on market efficiency. This evidence also contributes to the strand of studies analyzing the impact of informational trading on stock returns. In addition, this study provides evidence for market overreaction and the subsequent correction. The results for up and down markets contribute to the literature on the investors' trading behavior.

The purpose of the study is to examine overreaction effect in the Chinese stock market after the global financial crisis (GFC) of 2007 for all the stocks listed in Shanghai Stock Exchange (SSE) Composite 50 index.

To capture overreaction effect in the stock listed at SSE 50 Index, a time series analysis of average cumulative abnormal return within a unified framework is applied for the period of January 2009 to December 2015. From these loser and winner portfolios, contrarian strategy is applied to build arbitrage portfolio, which is the difference of mean reversions between loser and winner portfolios. The portfolio construction is based on a 12-month formation period and 6-month testing period for intermediate-term analysis and. for short-term analysis, 6 month formation and 3 month testing periods. The authors also applied regression analysis to test a return reversal effect for the sampled period.

Results show that contrarian strategy yields positive excess returns for the arbitrage portfolio for most of the testing periods. The intermediate baseline case shows the arbitrage portfolio producing an average excess return of 14.1%, while even the short-term one produces 4%, which is statistically significant at the 5% level. The study finds asymmetrical overreactions in the SSE especially for loser portfolios. The biggest winner and loser portfolios follow the mean reversal effect. Moreover, before-after test for the biggest winner and loser portfolios shows that the losers recovered and beat the market immediately.

The study could benefit government, policy makers and regulators by studying how presence of more individual investors than institutional investors of China stock market leads to more irrational decisions giving rise to volatility. The regulators could build favourable policies for institutional investors to give them incentive to invest more than individual investors through which market volatility could be controlled.

This research contributes to market behaviour research, showing how working under hypotheses of overreaction; gains can be made with contrarian investment strategy through arbitrage portfolios. The authors provide specific additional support for the short and medium-term overreaction in the SSE for the period 2009–2015 using regression analysis.

This research contributes to market behaviour research, showing how working under hypotheses of overreaction; gains can be made with contrarian investment strategy through arbitrage portfolios. We provide specific additional support for the short and medium-term overreaction in the SSE for the period 2009–2015 using regression analysis.

The purpose of this paper is to analyse empirically whether policies to improve the local business climate affect employment in general, and among groups of immigrants that suffer from structural unemployment.

The paper analyses the relation between Swedish entrepreneurs’ perception of the local business climate and total employment as well as employment among immigrants born outside of Europe, a group that tends to be particularly affected by structural unemployment. Instrumental variable and Arellano-Bond GMM estimation indicate that a better local business climate improves immigrants employment considerably more than total employment.

The results suggest that improvements in institutions and policies that entrepreneurs perceive as shaping the business climate may have an important effect on employment, in particular employment of groups that tend to have high rates of structural unemployment. Given the limitations, the estimates appear robust over a variety of specifications.

The authors use a subjective measure of local business climate policies, but instrument this with an exogenous variable and lagged variables. The unit of observation are Swedish municipalities, which in contrast to other countries control many factors important for business.

Employment policies often focus on labour market institutions. The results suggest that other policies and their local implementation may be equally important for employment. Unfortunately the study does not reveal much detail of which specific measures give the greatest effects. That remains to be done in future research.

The positive employment effects the authors find are particularly large for immigrants born outside of Europe. If the results are correct, then better local business climate could make an important contribution to social cohesion.

While there are more studies that analyse the relation between entrepreneurship and employment, much fewer previous studies have tried to establish a link between business climate policies and employment. The authors do this with a novel approach.

The purpose of this paper is to assess the performance of a contrarian investment strategy focusing on frequently traded large-cap US stocks. Previous criticisms that losers’ gains are not due to overreaction but due to their tendency to be thinly traded and smaller-sized firms than winners are addressed.

Portfolios based on past performance are constructed and it is examined whether contrarian returns exist. The Capital Asset Pricing Model (CAPM), Fama and French three-factor model and the Carhart’s (1997) momentum portfolio are used to test whether excess returns are feasible in a contrarian strategy.

The results show an asymmetric performance following portfolio formation. Although both, winners and losers portfolios, have gains during holding periods, losers outperform winners at all times, and with a differential of up to 29.2 per cent 36 months after portfolio formation. Furthermore, the loser and the winner portfolios’ alphas are significant, suggesting that the CAPM and the multifactor models are unable to explain return differentials between winners and losers. Our evidence supports two main conclusions. First, stock market overreaction still holds for a sample of large firms. Second, this is robust to the Fama and French’s (1993, 1996) three-factor model and Carhart’s (1997) momentum portfolio. Findings emphasize the relevance of a contrarian strategy when rebalancing investment portfolios.

Portfolio managers can improve stock returns by selling past winners and buying previous loser large-cap US stocks.

This paper is the first, to the authors’ knowledge, to examine frequently traded large-cap US stocks to avoid infrequent trading and size concerns.