This paper documents that mutual funds “herd” (trade together) into stocks with consensus sell-side analyst upgrades, and herd out of stocks with consensus downgrades. This influence of analyst recommendation changes on fund herding is stronger for downgrades, and among managers with greater career concerns. These findings indicate that career-concerned managers are incentivized to follow analyst information, and that managers have a greater tendency to herd on negative stock information, given the greater reputational and litigation risk of holding losing stocks. Furthermore, starting in the mid-1990s (when aggregate mutual fund equity ownership is significantly higher), stocks traded by career-concerned herds of fund managers in response to analyst recommendation changes experience a significant same-quarter price impact, followed by a sharp subsequent price reversal. Our evidence suggests that analyst recommendation revisions induce herding by career-concerned fund managers, and that this type of trading has become price destabilizing with the increasing level of mutual fund ownership of stocks. This paper was accepted by Wei Jiang, finance.

We introduce an alternative to the popular linear opinion pool for combining individual probability forecasts. One of the well-known problems with the linear opinion pool is that it can be poorly calibrated. It tends toward underconfidence as the crowd's diversity increases, i.e., as the variance in the individuals' means increases. To address this calibration problem, we propose the exterior-trimmed opinion pool. To form this pool, forecasts with low and high means, or cumulative distribution function (cdf) values, are trimmed away from a linear opinion pool. Exterior trimming decreases the pool's variance and improves its calibration. A linear opinion pool, however, will remain overconfident when individuals are overconfident and not very diverse. For these situations, we suggest trimming away forecasts with moderate means or cdf values. This interior trimming increases variance and reduces overconfidence. Using probability forecast data from U.S. and European Surveys of Professional Forecasters, we present empirical evidence that trimmed opinion pools can outperform the linear opinion pool. This paper was accepted by Rakesh Sarin, decision analysis.

Recent years have seen extensive investigation of the information aggregation properties of markets. However, relatively little is known about conditions under which a market will aggregate the private information of rational risk-averse traders who optimize their portfolios over time; in particular, what features of a market encourage traders to ultimately reveal their private information through trades? We consider a market model involving finitely many informed risk-averse traders interacting with a market maker. Our main result identifies a basic asymptotic smoothness condition on prices in the market that ensures information is aggregated as long as portfolios converge; furthermore, under this assumption, the allocation achieved is ex post Pareto efficient. Asymptotic smoothness is fairly mild: it requires that, eventually, infinitesimal purchases or sales should see the same per-unit price. Notably, we demonstrate that, under some mild conditions, algorithmic markets based on cost functions (or, equivalently, markets based on market scoring rules) aggregate the information of traders. This paper was accepted by Brad M. Barber, finance.

Online coproduction communities often face a challenge of whether to change or retain the knowledge they have created. Disparate and often conflicting theoretical models have been used to explain how these communities respond to this tension. We conducted a case study of how one online coproduction community—the nine-year history of the Wikipedia article on autism—handles this tension. We find that the nature of the change–retain tension and the community’s response to it fluctuates considerably over the life of the community. These changes bear striking similarities to processes associated with traditional software development life cycles, despite the absence of traditional control mechanisms. What initially appear to be conflicts in the extant literature actually describe different roles and production focus at the different stages of development. Disruptive events signal the need for the community to shift production focus, which often involves members joining and leaving the production process, rather than adopting new roles. This paper was accepted by Sandra Slaughter, information systems.

The central prediction of the current paper is that manufacturer price advertising may be a less effective tool for influencing demand than retailer price advertising. We manipulate the source of a price advertisement in an experiment run on a sample of pickup truck owners. Manufacturer price advertising leads to lower indicators of potential demand than dealer price advertising, even among consumers who are experienced with the brand. An econometric analysis of pickup truck sales, price, and advertising data shows that this effect is large enough to detect in market data. Manufacturer and dealer price advertising both increase the demand intercept and the responsiveness of demand to price, but the effects of dealer price advertising are larger. Although dealer price advertising is more effective than manufacturer price advertising, manufacturer price advertising may still be useful to reduce channel conflict. This paper was accepted by Pradeep Chintagunta, marketing.

Despite a 20-year trend toward integrated marketing communications, advertisers seldom coordinate television and search advertising campaigns. We find that television advertising for financial services brands increases both the number of related Google searches and searchers' tendency to use branded keywords in place of generic keywords. The elasticity of a brand's total searches with respect to its TV advertising is 0.17, an effect that peaks in the morning. These results suggest that practitioners should account for cross-media effects when planning, executing, and evaluating both television and search advertising campaigns. This paper was accepted by Pradeep Chintagunta, marketing.