Shrewd, crude or simply deluded? Comovement and the internet stock phenomenon

Zuckerman, Ezra W.; Rao, H. Raghav

doi:10.1093/icc/13.1.171

Cited by 50 publications

(33 citation statements)

References 56 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…This suggests, supporting the importance of categories in institutional pressures (e.g. Zuckerman & Rao, 2004;Benner, 2007;Aghion & Stein, 2008), that it is the focus on different metrics and valuation models associated with different categories that makes the same strategies more legitimate for some firms than others. Beyond our controls for firms' technological capabilities, there is also qualitative evidence in this study that the different reactions do not arise from a belief that one group of firms lack capabilities relative to the other group.…”

Section: Discussionmentioning

confidence: 84%

“…Finally, although we document shifts in categories arising from investors updating their portfolios and the associated shifts in analysts' reactions, we do not discuss firm-level characteristics that may accelerate or slow down these shifts. For instance, influential managers may act as entrepreneurial agents to catalyze the shifts in institutional categories or may use their influence to maintain current categorical expectations to their advantage (Zuckerman and Rao, 2004).…”

Section: Future Researchmentioning

confidence: 99%

See 1 more Smart Citation

Divergent Reactions to Convergent Strategies: Investor Beliefs and Analyst Reactions During Technological Change

Benner

Ranganathan

2013

Organization Science

View full text Add to dashboard Cite

An important outcome of technological change is industry "convergence," as a new technology spurs competition between established firms from different industries. We study the reactions of securities analysts, as important sources of institutional pressures for firms, to the similar product/market strategies undertaken by firms from different prior industries responding to industry convergence. Our empirical setting is the convergence between the wireline telecommunications and cable television industries in the period following the advent of voice over Internet protocol technology. Controlling for firm financial performance and capabilities, we find that analysts were consistently more positive toward the cable firms than toward the wireline telecom firms. Our findings further show that this divergence in reactions arises from differences in existing investor expectations and preferences concerning how firms create value; stocks owned by investors with a greater preference for growth receive more positive reactions than those owned by investors with a greater preference for margins. However, this divergence in reactions shrinks over time as convergence unfolds and as investors shift their shareholdings in response to misalignment between their preferences and firms' strategic changes. Reactions from analysts-reflecting inertial expectations of investors-may persist for a time despite changes to firms' strategies, thus creating challenges for some firms in responding to technological change and industry convergence while legitimating and enabling similar responses from their competitors. DIVERGENT REACTIONS TO CONVERGENT STRATEGIES: Investor beliefs and analyst reactions during technological change ABSTRACTAn important outcome of technological change is industry ‗convergence,' as a new technology spurs competition between established firms from different industries. We study the reactions of securities analysts, as important sources of institutional pressures for firms, to the similar product/market strategies undertaken by firms from different prior industries responding to industry convergence. Our empirical setting is the convergence between the wireline telecommunications and cable television industries in the period following the advent of Voice over Internet Protocol (VoIP) technology. Controlling for firm financial performance and capabilities, we find that analysts were consistently more positive towards the cable firms than towards the wireline telecom firms. Our findings further show that this divergence in reactions arises from different pre-convergence investor expectations and preferences concerning how firms create value; stocks owned by investors with a greater preference for growth receive more positive reactions than those owned by investors with a greater preference for margins. However, this divergence in reactions shrinks over time as convergence unfolds and as investors shift their shareholdings in response to misalignment between their preferences and firms' updated strategies. The...

show abstract

Section: Discussionmentioning

confidence: 84%

Section: Future Researchmentioning

confidence: 99%

Divergent Reactions to Convergent Strategies: Investor Beliefs and Analyst Reactions During Technological Change

Benner

Ranganathan

2013

Organization Science

View full text Add to dashboard Cite

show abstract

“…Such variation in response to category standards, while predicted by previous analysts of organizational forms as categories, has seldom been demonstrated empirically (for exceptions, see Waguespack & Sorenson, 2011;Zuckerman & Rao, 2004). We also show that product-based social codes influence organizations' behavior and structure in labor markets (Baron, 2004;Beckman & Burton, 2008, in addition to product markets.…”

mentioning

confidence: 43%

Structure at Work: Organizational Forms and the Division of Labor in U.S. Wineries

Haveman¹,

Swaminathan²,

Johnson³

2016

The Structuring of Work in Organizations

View full text Add to dashboard Cite

“…This is because as the amount of information available about the firm and the level of scrutiny the firm faces decreases we can expect a greater degree of uncertainty about the stock's price-value relationship, making a mispricing, or differing opinions regarding the correct price of a stock, more likely (cf. Zuckerman and Rao 2004). This variation, and lack of focus, motivates the use of knowledge sharing to focus the market on a new price.…”

Section: A Weak Arbitrage and Learning Processmentioning

confidence: 99%

Here's an Idea: Knowledge Sharing among Competitors to Build a Critical Mass

Botelho

2015

AMPROC

View full text Add to dashboard Cite

Shrewd, crude or simply deluded? Comovement and the internet stock phenomenon

Cited by 50 publications

References 56 publications

Divergent Reactions to Convergent Strategies: Investor Beliefs and Analyst Reactions During Technological Change

Divergent Reactions to Convergent Strategies: Investor Beliefs and Analyst Reactions During Technological Change

Structure at Work: Organizational Forms and the Division of Labor in U.S. Wineries

Here's an Idea: Knowledge Sharing among Competitors to Build a Critical Mass

Contact Info

Product

Resources

About