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The Fordham Business Student Research Journal

Vol. 1, No. 1Fall 2011

Fordham UniversityThe Gabelli School of Business

The Graduate School of Business Administration

T

he Fordham

Business Student R

esearch Journal Vol. 1, N

o. 1

All pms

The Fordham Business Student Research Journal is published by:

Donna C. Rapaccioli, Ph.D., Dean

The Gabelli School of Business

Fordham University

Rose Hill Campus

441 East Fordham Road

Bronx, New York 10458

and

David A. Gautschi, Ph.D., Dean

The Graduate School of Business Administration

Fordham University

Lincoln Center Campus

113 West 60th Street

New York, New York 10023

Printed in the United States

ISSN 2161-6612

[PUT ISSN BAR CODE HERE AND INCLUDE PRINTER’S UNION BUG]

THE FORDHAM BUSINESS STUDENT RESEARCH JOURNAL

VOL. 1 NUMBER 1 FALL 2011

Contents

Introduction 1 About the Gabelli School of Business 3 About the Graduate School of Business Administration 5 Dedication 8 Gabelli Class of 2011 Honors Thesis Program Research Papers “Countering Counterfeits: An Investigation of Message-Frame and Message-Focus Effects on Persuasion” Caroline Dahlgren 11 “Fund-Management Gender Composition: The Impact on Risk and Performance of Mutual Funds and Hedge Funds” Angela Luongo 47 “The Relationship Between Socioeconomic Status and Emotional Gratification for Consumers Who Purchase Overtly Branded (Overtly Designer) Goods” Sarah Siracusa 83

Abstracts of Previous Student Research Papers 101 List of Thesis Titles and Authors Since 2003 135

Submission Guidelines 140

1Fordham Business Student Research Journal

INTRODUCTION

In the fall of 2010, the Gabelli School of Business and the Graduate School of Business Administration launched The Fordham Business Student Research Journal to showcase the extraordinary research undertaken by students under the direct supervision of faculty members. This is the first issue of a journal we believe will become a major research outlet for outstanding undergraduate and graduate students of business. Our inaugural issue contains three exceptional research studies written by undergraduates in the Honors Thesis Program at the Gabelli School of Business. Caroline Dahlgren’s “Countering Counterfeits: An Investigation of Message-Frame and Message-Focus Effects on Persuasion” is a detailed investigation and analysis of the almost unending proliferation of counterfeit products in a variety of categories (e.g., airline parts, dry wall, handbags, pharmaceuticals, and baby food). Dahlgren’s superb essay and findings have already generated interest outside the Fordham community, especially among individuals concerned about the growth of counterfeit goods in the United States and abroad. She is a member of the Class of 2011 at Gabelli, and her faculty adviser was Yuliya Komarova, Ph.D., a member of the marketing faculty. Angela Luongo, also a member of the Class of 2011 at Gabelli, investigated “Fund-Management Gender Composition: The Impact on Risk and Performance of Mutual Funds and Hedge Funds.” Luongo examined gender differences in fund managers’ level of risk. Her findings were extraordinary. Measuring data over one-year, three-year, and five-year periods, she discovered that “funds managed by women outperform those managed by men with less risky portfolios.” Her original conclusions were supported by published research studies released several months after she finished her essay. Luongo’s faculty adviser was Yusif Simaan, Ph.D., a member of the finance faculty. Sarah Siracusa explored “The Relationship Between Socioeconomic Status and Emotional Gratification for Consumers Who Purchase Overtly Branded (Overtly Designer) Goods.” Starting with an overview of the literature on consumer behavior, brand, and brand equity, Siracusa focused on the burgeoning global luxury industry. Analyzing

2 Fordham Business Student Research Journal

demographic data, she discovered that “people in the upper income group displayed significantly more positive emotions when purchasing aspirational designer goods.” Siracusa is a member of the Class of 2011 at Gabelli; her faculty adviser was Marcia Flicker, Ph.D., a member of the marketing faculty. In 2010–2011, Flicker was a co-director of the Gabelli Honors Thesis Program.


ABOUT THE GABELLI SCHOOL OF BUSINESS

The Gabelli School of Business is the undergraduate business school of Fordham University, the Jesuit University of New York. Gabelli’s entire program is based on the Jesuit tradition of cura personalis (care for the whole person), homines pro aliis (men and women for others), and magis (more; i.e., never-ending improvement). The Gabelli School of Business was established in 1920 in the financial district of lower Manhattan, and it is presently located on Fordham’s Rose Hill campus in the Bronx. Gabelli is an AACSB-accredited business school, a partner with the CFA Institute, and a supporter of the Global Compact. It is consistently ranked as one of BusinessWeek’s Best Undergraduate Business Schools. Gabelli offers undergraduate day and evening programs that lead to B.S. degrees in Applied Accounting and Finance, Accounting Information Systems, Finance, Management of Information and Communications Systems, Marketing, and Public Accounting. Additionally, students may pursue a B.S. degree in Business Administration, in which they can choose a concentration in Accounting, Business Economics, Entrepreneurship, Finance, Information and Communication Systems, Management, and Marketing. A dual-concentration within the Business Administration degree is also available, along with options for specializations in Communications and Media Management, E-Business, and International Business through the G.L.O.B.E. program. Minors in Business Law and Ethics, Accounting, or in any of the liberal arts (via Fordham College at Rose Hill) are also available. The Gabelli School of Business employs a portfolio-based education, which approaches business education like a financial investment: students invest in a broad range of career assets and learn to manage their highly diversified portfolios to ensure career success. Pedagogical excellence and innovation make the achievement of all of our objectives possible. Our core curriculum and course content are revitalized on a regular basis to provide our students with the cutting-edge knowledge that they will need to be empowered to succeed. Additionally, we recognize that the world is changing at a rapid pace. We live in turbulent economic times; our economy is a global economy, and we face tough competition from all over the world. Thus, the challenges that students


must overcome are greater than ever before. However, opportunities continue to abound for those who are prepared, and the Gabelli School of Business is committed to providing a comprehensive, ever-evolving program that empowers students to meet the challenging business environment they encounter, now and in the future.

Honors Opportunities

The Gabelli School of Business offers a wealth of honors opportunities to students who wish to challenge and distinguish themselves. Outstanding incoming freshmen are invited to join the Global Business Honors Program. Qualified upperclassmen may apply to join one of the college’s honor societies or may be invited to join the Rev. William F. Boyle, S.J., Society. Additionally, Gabelli students may showcase their talents in academic contests and programs (e.g., the SEMI Program) sponsored by outside companies and professional organizations. Numerous research opportunities are available through undergraduate research learning opportunities, prestigious fellowships (e.g., Fulbright, Mitchell, and Rhodes), and the Honors Thesis Program.


ABOUT THE GRADUATE SCHOOL OF

Fordham University’s Graduate School of Business Administration (GBA) offers a dynamic educational experience in New York City with access to renowned faculty, a diverse business community, an international student body, and an extensive alumni network. Founded in the Jesuit tradition of excellence in education, intellectual vigor, and ethical conduct, GBA is dedicated to being an institution of global distinction. Our mission is to educate business professionals and equip them to manage effectively in a range of leadership roles. We take maximum advantage of our extraordinary New York City location. Based in the middle of Manhattan, adjacent to Lincoln Center, a short subway ride to Wall Street, and within walking distance of major banks and multinational corporations, GBA offers an unparalleled setting for learning about the breadth and depth of contemporary business thought and practice. We believe that business can and should be a noble calling, one that creates a livelihood for individuals and broader economic development for societies, and one that serves to generate and distribute the benefits of prosperity. Business enterprise offers an opportunity for the human spirit to expand into the world, to stretch the limits of what is possible, and to learn, through working together, how to achieve something greater than what has been accomplished before. A GBA business education is characterized by the Jesuit principle cura personalis (care for the whole person). We unite a striving entrepreneurial spirit with the ethical responsibilities of the heart, giving our students lifelong tools they can use not only to succeed, but also to serve and give back to the community. In this way, we develop GBA students to realize their potential to be the ethical, compassionate leaders our world needs today. Four themes run through our MBA programs and all of our specialized master’s degree programs:

Business in the Global Political Economy: Increasing globalization has produced increased uncertainty and complexity for managers.

BUSINESS ADMINISTRATION


Understanding business means understanding the world. Our emphasis on political economy means that we believe business professionals must understand how businesses and states interact and influence each other around the world.

Business in a Money Center: New York City is the principal money center in the world. Our programs go beyond our highly ranked offerings in finance and accounting to illuminate the role of the financial institution in all aspects of business practice.

Business and Media: New York City is a preeminent media and information center. As the media and information industries continue to experience unprecedented change, GBA assures that contemporary managers learn how to work with the media industry and how to use the tools of rapidly advancing information technology.

The Societal Value of Business: The global financial crisis and the Great Recession that began in 2008 remind us that business professionals need a foundation in ethical decision-making. Through the Fordham GBA curriculum and through the culture of the classroom, we inspire our students to address the responsibilities that businesses and business leaders have to society.

Established in 1969 as an exclusively part-time business program, GBA has successfully expanded far beyond its original scope. Today, full-time students comprise approximately 40 percent of enrollment. During this same period, the business world into which our students graduate has changed dramatically. GBA offers courses on a 15-week trimester system with a flexible full- or part-time curriculum, small, collaborative classes, and a rich variety of learning experiences both in and out of the classroom. Graduate students can choose from among six MBA concentrations, eight cutting-edge master’s degree programs and diverse electives, enabling them to customize a unique graduate education to meet their individual needs. The GBA curriculum features a full range of MBA programs, including the traditional MBA (full- and part-time) with concentrations in: Public Accounting/Accounting, Finance, Communications and Media Management, Information Systems, Management Systems, and Marketing. MBA students can further specialize with designations in Entrepreneurship, Global Sustainability, Electronic Business, and International Business. GBA also offers an Executive MBA degree; a pre-MBA program; international study programs; and joint degree options, including a J.D./M.B.A. program with Fordham University School of


Law, and an M.T.A. program, which combines an M.B.A. in

examination. Fordham GBA also provides a range of specialized M.S. degrees, including the 3 Continent M.S. in Global Management (3CMGM) and programs in: Accounting, Business Enterprise, Communications and Media Management, Global Finance, Investor Relations, Quantitative Finance, and Taxation. At Fordham GBA, we provide a relevant and rigorous graduate business education for full-time, part-time, and executive program participants alike. As the global business environment evolves ever more rapidly and is increasingly uncertain, we are committed to responding with continuous improvement—by keeping our curriculum rigorous and relevant to today’s market needs, and becoming more nimble in our ability to respond quickly to change and educate our students about critical developments in business as they unfold. Our students become part of a supportive, lifelong community. GBA forges links with national and international companies that maintain a corporate presence in the city’s regional economy, and our dynamic student clubs enhance connections to the world of business and to our expansive network of alumni, friends, and partners. Together we strive, through our heritage of teaching the whole person, to foster the spirit of business in the heart of New York and beyond.

Public Accounting with an M.S. in Taxation and preparation for the CPA


Dedication

Patricia P. Ramsey

In the spring of 2011, Fordham University and the Schools of Business sustained a deep loss with the passing of Patricia P. Ramsey, Ph.D. Pat joined Fordham in 1981. During her distinguished career, she received myriad accolades, including an outstanding teacher of the year award and a United Student Government faculty award. She was co-author of two major books: Business Statistics for Quality and Productivity (Prentice Hall, 1995) and Applied Statistics for Engineers and Scientists (Prentice Hall, 2001). Pat served in a number of important administrative roles at both the Gabelli School of Business and the Graduate School of Business Administration (GBA). She was the faculty coordinator of the GBA program in China (BiMBA). Yet Pat was best known for her long service as co-director of the Gabelli Honors Thesis Program, where she mentored dozens of Gabelli students. This issue of The Fordham Business Student Research Journal is dedicated to Pat Ramsey. Her keen wit and devotion to scholarship will be missed.


COUNTERING COUNTERFEITS: AN INVESTIGATION OF MESSAGE-FRAME AND MESSAGE-FOCUS EFFECTS ON

PERSUASION

Caroline Dahlgren

Abstract

The prevalence of counterfeit products throughout the world has greatly increased over the course of the past two decades. These goods span a wide array of industries and vary greatly in quality, aesthetics, and price. There have been reports of counterfeits in nearly every sector of the economy; counterfeit goods include airline parts, dry wall, handbags, pharmaceuticals, and baby food (International Chamber of Commerce, 2008). Each industry engages in its own battle with these products and counterfeiters, in hopes of protecting its intellectual property, consumers, and its bottom line. The roots of the counterfeiting industry are deeply intertwined with various aspects of the global economy, resulting in the challenging and ever-changing task of gaining a firm understanding of the subject matter.


Introduction

It is estimated that counterfeit goods take away $250 billion in product sales from legitimate businesses each year, and in turn produce approximately $600 billion in revenue (International Anti-Counterfeiting Coalition [IACC], 2010). In addition, counterfeit goods are directly responsible for the loss of 750,000 U.S. jobs (IACC, 2010), and account for 10% of the world trade each year (Yoo and Lee, 2009, p. 280). Counterfeits do not simply affect world trade and global economies; they bear consequences for individuals as well, as these goods are not backed by any safety standards or quality control. In recent years, the counterfeit industry has also been linked with funding and helping to proliferate such social problems as drug trafficking, human trafficking, terrorism, child labor, and organized crime (IACC, 2010). Notwithstanding the aforementioned detriments, no standard international definition of a counterfeit product exists. In order to attempt to conquer these negative consequences, an industry definition of what it means to counterfeit should be established as clearly as possible. Cordell asserts that “any unauthorized manufacturing of goods whose special characteristics are protected as intellectual property rights (trademarks, patents, and copyrights) constitutes counterfeiting.” (Cordell, Wongtada, and Kieschnick, 1996, p. 42). For the purposes of this paper, this assertion will serve as a definition when discussing counterfeits or the counterfeiting industry. Global consumer demand for counterfeits has increased by 10,000 percent over the course of the past two decades (IACC, 2010). Although this industry has been fueled by many factors, including technological innovations (product quality and logistics), brand awareness, and globalization (lower trade barriers), the ultimate deciding factor on whether counterfeits are produced is consumer demand (Chaudhry and Zimmerman, 2009). For many consumers, a counterfeit purchase is made unknowingly (deceptive counterfeit). Others are well aware of the nature of the product they are purchasing (non-deceptive counterfeits) as well as the industry from which it comes. Consumers who choose to buy counterfeit do so for myriad reasons; the most popular reason is to either accommodate internal feelings of aspiration and prestige (value-expressive function) or to impress friends with brand names that they otherwise could not afford (social-adjustive function) (Wilcox, Kim, and Sen, 2009).


Though there has been much research on consumer attitudes toward counterfeit goods and the impact of counterfeits on genuine brands, less focus has been placed on strategies to prevent counterfeit consumption. The following research will attempt to better understand how advertising tactics are best employed by organizations in order to curtail the purchasing of counterfeit products. One way that businesses and the government may persuade people to avoid buying counterfeits is through anti-counterfeiting advertising campaigns. Few studies exist, however, on what makes for an effective anti-counterfeiting advertising campaign. Although anti-counterfeiting advertising techniques have been used in the past, there is no evidence of their effectiveness or consumer reactions to them. “The key is for companies to actually test the salience of their advertisements to determine whether the message appeal actually influences the behavior of the targeted audience.” (Chaudhry and Zimmerman, 2009, p. 92). This research paper will specifically focus on counterfeit luxury personal accessories (handbags, sunglasses, watches, jewelry, etc.) and will test both gain (positive) and loss (negative) messages directed toward the consumer using framing techniques. Based on advertising literature, a mere framing (i.e., wording) of the message may influence the persuasive power of a message (Chang, 2008, p. 24). An attempt will also be made to examine the effects of altering the advertisements to reflect doing good (or harm) for one’s community (or self). This study aims to gain new insights on effective ways to discourage counterfeit consumption by investigating how the framing of anti-counterfeiting advertising messages may differentially impact their effectiveness. Specifically, the goal of this research is to test if and how the manner in which consumers are reminded of the reasons not to purchase counterfeits may impact their related attitudes and behavioral intentions. It is hypothesized that, in general, reminding consumers of such reasons is only modestly effective; however, the way in which the message is framed may substantially improve its persuasiveness. This study has two main objectives: 1) to explore how gain/loss advertisement frames differentially impact the viewer of an anti-counterfeiting message; and 2) to investigate and compare how communication focused on the individual and communication focused on groups of people (such as members of a community) affect the persuasiveness of the advertisement.


I. Literature Review

A. Consumer Attitudes

The price points on counterfeit goods make them attractive alternatives to their genuine counterparts. It is well known among consumers that counterfeit goods are sold at a fraction of the price of the genuine item; this helps to give consumers the impression that luxury can be had at an affordable price. The attitudes consumers hold in relation to counterfeit goods play a major role in how likely they are to make a counterfeit purchase (Marcketti and Shelley, 2009, p. 328). “Attitude is directly derived from a group of beliefs that one holds about the behavior and evaluations of the consequences of the belief.” (Marcketti & Shelley, 2009, p. 328). Attitudes toward counterfeits are the result of two factors: consumer attitudes toward the issues in the genuine brand’s sector and knowledge about counterfeiting (Marcketti and Shelley, 2009, p. 329). Marcketti and Shelley found in their 2009 study on consumer attitudes toward counterfeits that the “willingness to pay more for non-counterfeit goods increased directly with greater concern, knowledge and attitude towards counterfeit apparel goods” (Marcketti and Shelley, 2009, p. 335). Consumer attitudes and intentions are not predetermined by consumer personality. Environmental factors and consumer reference groups (e.g., family, friends, and co-workers) also play a large role in how consumers view counterfeit goods in the marketplace. De Matos, Ituassu, and Rossi (2007) present evidence that attitudes toward counterfeits are shaped by perceived risk, subjective norms (pressure from reference groups), integrity, personal gratification, and prior counterfeit purchases (de Matos, Ituassu, & Rossi, 2007, p. 47). Yoo and Kim (2009) concur with these findings on the point that prior purchases are likely to dictate future purchase behavior; they assert that “purchase intention of luxury fashion counterfeits was positively predicted by past purchase experiences of counterfeits, positive attitudes toward buying counterfeits by economic benefits, positive attitudes toward buying counterfeits by hedonistic benefits and materialism” (p. 284). Swami, Chamorro-Premuzic, and Furnham (2009) also bring up the concept of materialism. In their research, acquisition centrality (“the extent to which possessions occupy a central place in one’s life”) was shown to have a positive correlation with the willingness to buy counterfeit goods (p. 823). Thus, those who have a


specific interest in acquiring abundant amounts of material goods are more likely to consume counterfeits. Though the aforementioned sources have demonstrated that certain attitudes contribute to consumers’ willingness to buy counterfeit goods, these generalities must be placed within the context of the international marketplace. Perspectives of consumers in different regions of the world vary greatly, as do their views on counterfeit goods. For example, Chinese consumers possess a very different idea about counterfeiting than Western consumers possess (Kwong, Yu, Leung, and Wang, 2009, p. 161). Chinese consumers are generally very risk-averse, cautious, and slow to adopt new products; they tend to service and keep the old product as long as it still works (Kwong, Yu, Leung, and Wang, 2009). This contrasts directly with Western consumers who, according to Kwong, “appear to be more adventurous and seek novelty, perhaps fostering a materialistic lifestyle” (Kwong, et al., 2009). Though these approaches to purchase and consumption are extraordinarily different, both are able to accommodate counterfeit consumption for different reasons. While Chinese consumers are traditionally more risk averse, counterfeiting does not present much of a risk in China. “In the Chinese tradition, copying is legitimate and ethical, and confers the social benefit of knowledge dissemination” (Wan, Luk, Yau, Tse, Sin, Kwong, and Chow, 2008, p. 188). Though cultural attitudes differ, it is imperative to understand the implications for the consumer when purchasing a counterfeit good. Western consumers are more likely to enter into a situation with more risk to purchase a counterfeit product, in an effort to satisfy a need to attain more material goods and obtain as many “luxury” products as possible (Wan, et. al., 2008, p. 188). Chinese consumers, on the other hand, purchase products because they need them functionally. For the Chinese consumer, there is nothing wrong with imitation, as repetition is a large and positive part of their cultural tradition (Wan, et. al., 2008, p. 188).

B. Motivations for Purchasing Counterfeits Running tangential to consumer attitudes toward counterfeits are

consumer motivations for purchasing counterfeits. Though consumers’ attitudes can render them positively or negatively oriented toward counterfeit consumption, motivations provide insight into why one who is positively oriented toward counterfeits would take the next step and actually make a purchase. Those who have a positive view toward these products may act on their attitude and could do so for a variety of reasons.


Wilcox, Kim and Sen (2009) assert that consumers are motivated to buy counterfeit by social factors (p. 247). These researchers present two roles that acquisition fills, which can serve as motivators and are directly linked to purchasing behavior: the social-adjustive function and the value-expressive function. “When consumers have a social-adjustive attitude toward a product they are motivated to consume it to gain approval in social situations” (p. 248), while a value-expressive function “help[s] people communicate their central beliefs, attitudes, and values to others” (pp. 248-249). This study concludes that consumers have significantly higher purchase intent toward counterfeits if they hold a social-adjustive attitude versus a value-expressive attitude. Thus, this study asserts that the major motivators for consumers to obtain counterfeit products are external social factors: to impress others and to gain access to certain social circles. Han, Nunes, and Dreze (2010) also make a case for the aforementioned “social-adjustive” function. Their research presents the idea of “brand prominence,” which weighs how “loudly” or “softly” brand marks and brand names are displayed on products. The case that this study makes is that certain types of consumers enjoy different levels of “loudness” to be displayed on their products. The study draws two important conclusions: those items that are most frequently counterfeited are among the “loudest” from their respective brands, and the people who purchase counterfeits are in need of status recognition. Since those who typically purchase counterfeit goods require status recognition due to their social-adjustive attitude, counterfeiters respond to demand by producing more of them. The study goes on to say that since consumers of counterfeit goods cannot afford the genuine luxury products, they “use loud counterfeits to emulate those they recognize to be wealthy” (p. 15).

C. Post-Purchase Perceptions of Counterfeit Goods

The literature that has been presented thus far has dealt with the consumer mentalities leading up to a counterfeit purchase. Though there seems to be less research on the topic, post-purchase emotions and psychology contain important cues to understand this complex societal issue. A study done by Gistri et al. (2009) discusses both how consumers go about making a decision on what counterfeit product to purchase and how they feel after the purchase is made. “Consumers of fakes accumulate facts that increase their knowledge of the originals with the aim of picking a ‘good counterfeit’ that will render the personal and private use of the product highly gratifying at the same time” (p. 366). Quoting a consumer,


Luca, Gistri et al. report: “Knowing the original is fundamental to buying a counterfeit, in general you like the original, it costs too much and you resort to the counterfeit version …” (p. 366). This study demonstrates that there is a thought process that goes into purchasing a counterfeit product, much like any other purchase throughout a consumer’s life. For many consumers, an imitation good is a routine purchase, with consequences no different than that of an item bought in a department store. “It’s a great satisfaction to have perfect counterfeit sunglasses. … [F]or me, the purchase is not so exciting; instead I’m very happy when I wear them, I like the fact that I can have a lot of branded sunglasses so I can change them very often; yes it’s a great pleasure!” the authors were told by Francesca (p. 367). Though many consumers are proud of their counterfeit purchases, there is evidence that others carry themselves differently when using such products. Gino, Norton, and Ariely (2010) demonstrate that those who wore non-deceptive counterfeit sunglasses were more inclined to cheat on a given research task and deem others’ behavior as unethical. The study argues that there is more to purchasing an imitation product than there may seem to be; on principle, the authors assert that the purchaser becomes a “counterfeit self,” someone who gives the outward impression they are able to purchase certain products, when in reality they truly cannot afford to purchase them. The “counterfeit self” harms the “self-image via inauthenticity” (p. 719). In addition, “actual behavior in our experiments suggests that the influence of wearing counterfeits is deceptive, in that they have an unexpected influence on individuals’ ethicality” (Commuri, 2009, p. 96).

D. Impact of Counterfeits on Genuine Brands

When it comes to counterfeits, companies that produce genuine brands are most concerned with retaining both their customer base and the equity that has been built up within their brand, so as to maintain revenue and prestige. Commuri (2009) studied the impact of imitation goods on consumers of genuine brand goods. His research shows that these consumers fall into one of three categories when they come to know that counterfeits of the brands they typically purchase are being sold in their communities: “flight (abandoning the brand), reclamation (elaborating the pioneering patronage of the brand), or abranding (disguising all brand cues)” (p. 86). “Consumers engaged in flight are fleeing from the


possibility of being mistaken as consumers of counterfeits, reclaimers are dislodging dissonance by typecasting the new patrons of the brand as lacking scruples, and abranders want to sustain social distance by muddling comparison and emulation” (p. 95). This study concludes that the action a particular consumer chooses to take in this scenario depends on his or her age, status, and social standing. Commuri also asserts that in attempts to combat the problem too much attention has been focused on the counterfeiting side, as opposed to the genuine brand consumer side; “brand managers must aim to protect and account for customer equity, not merely brand equity” (Commuri, 2009, p. 96). The loss of brand value has become so severe that in several cases companies that produce genuine brands have taken legal action against counterfeiters and those who are harboring counterfeit products. Raids take place nearly every day in major U.S. cities, such as New York and San Francisco, where authorities frequently find counterfeits in shipping containers and warehouses. Many brands are also becoming aware of mainstream retailers who are carrying products similar in design to their own. In 2004, Louis Vuitton sued Burlington Coat Factory, an off-price retailer, for “violating the Louis Vuitton Toile Monogram designs and its Multicolore Murakami designs, and violating its copyright for the ‘Murakami’ bag” (Khachatourian, 2007, p. 8). “Louis Vuitton claimed trademark infringement and counterfeiting, unfair competition and false designation of origin, trade dress infringement and trademark dilution, under the Trademark Act of 1946 (‘Lanham Act’)” (Khachatourian, 2007, p. 8). This act “prohibits the use in commerce, without consent, of any registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods in a way that is likely to cause confusion with the plaintiff’s trademark” (Trademark Act of 1946 (Lanham Act), 15 U.S.C., 1114 and 1125(a)). Thwarting counterfeiters has become both a costly and time-consuming process. Unfortunately, luxury brand companies are not presented with much of a choice; defending themselves against counterfeiters is necessary to maintain the most valuable part of their business: their brand marks.

E. Counterfeit Prevention Many luxury brand companies that find counterfeit versions of their products in the marketplace choose to take preventive measures in hopes of deterring the production of such goods in the future. Peggy


Chaudhry (2008), one of the most prominent authors on the subject of anti-counterfeiting strategies, asserts that the implementation of prevention methods is dependent on the geographic market in which the methods are to be put in place. Just as consumers view counterfeits from varied global perspectives, differing anti-counterfeit strategies must be employed throughout the world. Chaudhry questioned more than 200 executives from nations around the world and found that distinctive anti-counterfeiting strategies were more attractive to those from differing regions (MIT Sloan Management Review, 2008, p. 9). Executives in the United States placed the most importance on “packaging and pricing solutions, however, their New Zealand counterparts deemed it most effective to educate the public about the benefits of the genuine product through advertising and marketing” (MIT Sloan Management Review, 2008, p. 9). In a study on anti-counterfeiting strategies, Chaudhry, Cordell, and Zimmerman (2008) present five target models an in attempt to minimize the negative effects the counterfeiting industry has on society. These models are designed to work via the following channels: consumers, host-country governments, distributions channels, international organizations, and those who are pirating the goods, in order to achieve the overall goal of minimizing the detriments which coincide with counterfeiting. These channels, combined with more than 30 suggested strategies within the study, are able to create myriad approaches to the problem of counterfeiting, allowing different methods to be tailored to the market in which they will be put in place. Chaudhry and Stumpf (2008, working paper) outline strategies that can aid genuine brand organizations in the fight against counterfeits. The first of these is communication with other companies in order to become knowledgeable about counterfeiting tactics throughout the world (MIT Sloan Management Review, 2008, p. 9). By working together with other genuine brands, organizations are able to compile resources, knowledge, and support for the common cause. The authors also recommend that companies utilize marketing and advertising campaigns that raise awareness among consumers of the negative aspects of the counterfeit industry. Within the context of awareness campaigns, there are several possible approaches, including marketing that addresses: fear, peer pressure, low quality of the counterfeit product, role models, and association with organized crime (MIT Sloan Management Review, 2008, p. 10). Each of these methods has its merits. This study, however, recommends that companies publicize recent


counterfeit prosecutions, which “can instill fear in consumers and producers of counterfeiting merchandise, lowering both supply and demand” (MIT Sloan Management Review, 2008, p. 10). The study’s final recommendation is for companies to contact policy makers and urge them to support public policy, which creates stronger legal ramifications for those who manufacture, harbor, and sell counterfeits.

II. Hypothesis Development

The development of strategies by which to inform and acknowledge the realties of the counterfeiting industry has the potential of delivering a powerful and previously overlooked message to the public. Though various organizations have devised anti-counterfeiting advertising and awareness campaigns before, the study conducted here seeks to understand how consumers react to these advertisements, and if they are an effective means by which to deter counterfeit consumption behavior. In addition, this study investigates the framing of anti-counterfeiting advertisements. Given that they are framed in either a positive (gain) or negative (loss) light, which is more effective in relation to consumer behavior and why? Like any advertising message, the ones presented in this study make consumers aware of the situation. Yankelovich established a seven-step framework in 1992 by which to move an item of concern (in this case counterfeiting awareness) into the public sphere, making it an issue of interest. Stage one of this process is “dawning awareness,” in which the goal is to alert the public to the issue at hand. In light of all of the negative aspects of this industry and the lack of general knowledge of them, this study serves to evaluate the consequences if such information were openly disseminated. Tversky and Kahneman propose in their 1979 work that loss frames are more effective in persuading individuals to do something, due to the fact that their research shows that people are naturally averse to risk (Kahneman and Tversky, 1979). In addition, Tversky and Kahneman assert the importance of framing (or comprehending similar communication from different vantage points) on an individual and the influence it can have over the reader of an advertisement. As presented in


Cho and Boster’s (2010) study, the concept of using gain and loss framing within the advertising context enables the researcher to gather evidence about how consumers are affected by deterrent advertising (Cho and Boster, 2010). Though their study was somewhat inconclusive, it did find that adolescents were more likely to respond in a positive way to loss-framed messages versus those that were gain-framed. To follow up on this piece of research and employ it in the counterfeiting context, each of the advertisements presented will have either a gain or loss frame (also referred to interchangeably as positively and negatively framed advertisements). Chang (2008) finds in his study on advertising-framing effects that “positively (gain) framed ad messages evoked higher levels of positive affect and lower levels of negative affect than did negatively (loss) framed advertising messages” (p. 24). This conclusion may or may not be true for advertisements pertaining to counterfeiting. By framing anti-counterfeiting advertisements both positively (gain) and negatively (loss), consumer response can be tested in order to find out which tactic evokes emotion from such campaigns. A study by Katherine White (2009) and John Peloza delves into the question of whether “other-benefit (self-benefit) appeals generate more favorable donation support than self-benefit (other-benefit) appeals in situations that heighten (versus minimize) public self-image concerns” (p. 109). This research found that individuals strive to manage their external impressions on others “by behaving in a manner consistent with normative expectations” (p. 109). Though this particular study is not linked to the counterfeiting industry, it does evoke questions that should be posed to consumers in the counterfeiting context. The idea of testing consumer self-benefit versus other-benefit in anti-counterfeiting advertising campaigns will prove to be beneficial to understanding consumer reactions to this type of behavioral marketing and how to target future advertisements. This study will test which tactic is most effective: individuals (or others) doing good (or avoiding doing harm) in hopes of discouraging counterfeit consumption. Thus, two factors are involved in this study: the focus factor and the consequences-framing factor. This study observes how the advertisement is perceived among participants, whether the consequences of counterfeiting pertain to the individual or others (focus factor) as well as whether the consequences are gain-framed or about avoiding loss (consequences-framing factor). More formally it can be hypothesized:


H: The effect of an anti-counterfeiting message frame (gain versus loss) on message persuasiveness will be moderated by the message focus (self versus others).

Though they are powerful persuasion tools independent of each other, message frame and focus are able to offer an even more streamlined and perhaps more effective communication when used in combination with one another. Researchers Lee and Aaker argue, “People’s goals associated with regulatory focus moderate the effect of the message framing on persuasion” (p. 205). Lee and Aaker ultimately conclude that gain frames are more effective in persuading individuals when the message is promotion focused and perceived risk is low. In terms of self-focus versus a focus on others, Peggy Sue Loroz pairs this measure (identified as reference points in her research) with framing effects in persuasive appeals. This research, which is similar to the aforementioned hypothesis of this study, finds that “in persuasive social contexts, negative [loss] frames may be the most persuasive with self referencing appeals while positive [gain] frames work best when benefits to self as well as others are emphasized” (Loroz, 2007). Thus this study will serve to explore in detail the combinations of framing and focus effects in the context of anti-counterfeiting advertising campaigns.

III. Method and Study Overview

This study will commence by administering a survey to a group of 180 individuals who have been selected to sit on a Qualrex panel. This study used five groups of 30 individuals each. After being asked to review an advertisement, these five groups were given a survey pertaining to consumer perceptions about counterfeiting. The survey consisted of both qualitative questions as well as scale-based quantitative questions. Groups 1 and 2 saw “gain-frame” ads, while groups 4 and 5 saw “loss-frame” messages. Those who received the gain-frame communication were presented with an advertisement that implies they are doing good. The loss-frame communication implies the participants are avoiding harm. Those who receive a “self-focused” advertisement find the message targeted directly at them, whereas those who are given an “others-focused” advertisement find it targeted toward their community as a whole. The advertisements, which can be found in the Appendix of this paper, have been designed specifically for this study. Group 3 will receive


neutral communication and will serve as a control for the study. The group that an individual is assigned to is completely randomized. An additional 25 (five for each group) participants took part in the study as a precautionary measure, should any of the data collected have to be thrown out. The focal dependant variable in this study is the perceived morality of counterfeit consumption; this will be used as a proxy for advertisement persuasiveness within the study.


IV. Study Design

DO GOOD AVOID DOING HARM

YOU A C

OTHERS B D


V. Advertisement Design

The nature of this study required an advertising campaign to be designed specifically for the purposes of this research. The advertisements depicted in Appendices A to E of this paper were inspired by a campaign (Appendix F), which was launched by the International Anti-Counterfeiting Coalition (“International anti-counterfeiting coalition—homepage,” 2011). Though this campaign had advertisements similar to those ultimately created for this study, the International Anti-Counterfeiting Coalition did not use multiple frames or focus within their ads. When creating the advertisements for this study, it was important to ensure that the ads were realistic; thus, by using elements (sunglasses and layout) from a previously launched campaign, a greater degree of validity could be attributed to the advertisements presented in this study. In order to make the campaign for this study as widely accepted as possible, a gender-neutral product was chosen (sunglasses). The photo of the sunglasses displays the name “Prada” on both the tag and the product itself. The font used on the tag is not identical to that of an actual Prada product, making it fairly obvious to a consumer educated in luxury products that these sunglasses are counterfeit. The message of the campaign remains constant among the four different versions of the ad, with the exception of the frame (loss vs. gain) and the focus (yourself vs. the people of NYC) factors. The text related to those factors appears directly below the image of the sunglasses. Below that text, the following statement appears in all versions of the ad: “The counterfeiting industry finances illegal drug and human trafficking feeding crime in NYC and around the world.”) The control advertisement used in this study was meant to represent a neutral message (not anti-counterfeiting). The layout, photograph, and overall look of the advertisement remained the same as the four previous ads. This ad, however, does not communicate an anti-counterfeiting message, but rather one about a fashion-related event happening in New York City. Respondents viewing this advertisement were treated the same as those seeing any of the other four ads, with the exception of the content of the advertisement they saw.

VI. Procedure

A total of 180 individuals (ranging in age from 21 to 72) participated in the study. Qualtrics recruited the participants specifically


for the purpose of this study from a pool of residents of New York City and its neighboring counties. Each recruit received an e-mail invitation from Qualtrics to take part in “a series of consumer behavior research studies that would aid researchers in better understanding how consumers react to marketing communication.” Those who chose to participate were instructed to follow the link to begin the study. All study participants received a monetary compensation of $5 each.

First, participants read an introduction to a presumably independent Study 1 of the series in which they were told, “On the next screen, you will be exposed to an advertisement. The computer, from a large pool of possibilities, will randomly select the specific advertisement copy you will see. Please view the ad to an extent that you form an opinion before proceeding to the next screen to answer a few related questions. Keep in mind that you will not be able to go back to the ad once you move to the next screen.” Subsequently, participants were randomly assigned by Qualtrics software to one of the five experimental conditions and viewed one of the five versions of the ad (four were anti-counterfeit messages, with varying message frame and focus; the fifth, an announcement regarding an event, had the same graphic design elements as the other four ads to serve as a control). Hence, the study design was 2 (message frame: gain vs. loss) x 2 (message focus: self vs. others) and a control. While the ads were identical in graphic design and shared some generic textual content per our study design, the following message variations allowed for effective manipulation of message frame and focus:

1 (gain frame/self-focus) - Say no to counterfeits. Be good to

yourself … The counterfeit industry finances illegal drug and human trafficking feeding crime in NYC and around the world.

2 (gain frame/others-focus) - Say no to counterfeits. Be good to the people of NYC… The counterfeit industry finances illegal drug and human trafficking feeding crime in NYC and around the world.

3 (loss frame/self-focus) - Say no to counterfeits. Don’t put yourself in harm’s way… The counterfeit industry finances illegal drug and human trafficking feeding crime in NYC and around the world.

27Fordham Business Student Research Journal 4 (loss frame/others-focus) - Say no to counterfeits. Don’t put

the people of NYC in harm’s way … The counterfeit industry finances illegal drug and human trafficking feeding crime in NYC and around the world.

5 (control) – New Models are on their way… Join the official

Spring 2011 High Fashion Shopping Spree in NYC! The kick-off event will take place on May 15, 2011 in Times Square. Look out for the official High Fashion Shopping Spree schedule.

After the participants read the advertisements, all were asked to complete a series of questions that would offer researchers an insight on consumer reactions to the ad copy being tested. Specifically, participants responded to a four-item mood measure (Allen and Janiszewski, 1989). All questions used seven-point Likert scales. (1 = Strongly disagree, 7 = Strongly agree or 1 = Don’t like it at all, 7 = Like it very much). At the conclusion of what participants perceived to be Study 1, they were asked to elaborate on where they would suggest the advertisement be placed (i.e., specific magazines, TV programs, etc.). This last open-ended question was intended to be used as a check for involvement in and comprehension of the task. Next, participants were thanked for their participation and asked to move on to the next study.

The second study, though seemingly separate from the first, in actuality was the section of the original study in which we solicited responses to the focal dependent variable, along with a number of filler questions, which were included to prevent hypothesis-guessing. We intentionally separated dependent variables (i.e., Study 2) from the manipulation (Study 1) in the minds of participants in order to avoid demand responses. At the beginning of Study 2, participants were told: “Welcome to the 2nd Study in the Series! Here, we are interested in better understanding consumer attitudes toward various marketing phenomena. On the next few screens, you will be asked to respond to a battery of questions that have no right or wrong answers. Please keep in mind that the study is completely confidential and we are only interested in your honest opinion! Please proceed to the next screen to begin!” Participants were then asked to move to the next screen, where they were to respond to several questions related to our dependant variable: the moral measures index (a three-item index measuring attitude toward the morality of


counterfeit goods). These questions were scaled from 1 = strongly disagree to 7 = strongly agree. Similar to the moral measures index, respondents were also asked a series of filter questions about counterfeit products and their intentions to purchase them. We included one open-ended question, inviting respondents to state their favorite luxury brand, to once again have an opportunity to exclude from the analysis those participants who were not, for instance, familiar with luxury brands and therefore not suitable for the study. The study concluded with some demographic questions (age, income, gender, education level, number of household members, occupation, place of residence, and nationality). After responding to these questions, each participant was thanked for his or her time and opinions in the second study.

VII. Analysis and Results

To test the proposed interaction effect of advertisement frame (gain vs. loss) and advertisement focus (self vs. others) on ad persuasiveness, first a Perceived Appropriateness of Counterfeit Consumption Index (the Index) was created as a proxy measure of persuasion ( = .96). Recall that lower index values correspond to more negative perception of counterfeit consumption and therefore reflect greater persuasion or effectiveness of an anti-counterfeit advertisement. Statistical analysis was run on a 2 (frame: gain, loss) x 2 (focus: self, others) analysis of variance (ANOVA) with the Index as a dependent variable. In addition, considering the nature of the manipulations (i.e., ads containing an image of luxury sunglasses) and the extant research (Tom et al. (1998)) found that “customers who buy counterfeit products tend to be younger, to earn less income, and to have received less education” (Kwong et al., 223)), gender and age were included in the model as covariates. As predicted, the ANOVA revealed no main effects and a significant frame-by-focus interaction F (1,119) = 5.07, p < .05 (Please see Figure 1).

To further explore the nature of the aforementioned interaction, post-hoc contrasts were run to compare the four means (i.e., average indices) corresponding to the manipulated conditions. The analyses revealed two significant contrasts. The first comparison showed that a loss-frame advertisement with a self-focus (M = 2.65) was more effective than a loss-frame advertisement with a focus on others (M = 3.44) (F (2,95) = 3.11 p = .05). The second comparison showed that a gain frame


advertisement with a focus on others (M = 2.71) was significantly more effective than a loss-frame advertisement with a focus on others (M = 3.44) (F (2,95) = 3.09 p = .05). Next, the same four means, corresponding to the four experimental conditions, were compared to the control condition. Two marginally significant differences were revealed. We find that, compared to the control (M = 3.28), loss frame is effective only when an anti-counterfeit message is focused on self (M = 2.65; F = 2.911, p < .10), while gain frame is effective only when an anti-counterfeit message is focused on others (M = 2.71; F = 3.588, p < .10). As such, a loss-frame/others-focus ad message and a gain-frame/self-focus ad message were no more effective than the control (p > .10).

VIII. Conclusion

This study utilized a measure of morality (perceived morality of counterfeit consumption index) as a proxy for persuasiveness in relation to anti-counterfeit advertisements. Morality is perceived to pertain directly to the right and wrong nature of a given task or idea. This allowed participants to speak candidly about their feelings without having to come forward and discuss their association (or lack thereof) with counterfeits. Analyzing the statistics this study produced it can be asserted that it is not merely advertising frame or advertising focus, but the unique combination of the two factors that produce results in this context. If a gain-frame advertisement is desired in a given marketing strategy, it is best to focus the ad on others; if a loss-frame is suitable, then the communication should be focused on the individual. These results coincide with those of Peggy Sue Loroz, who also studied both framing and focus effects on advertisements. With the results of this study we fail to reject our hypothesis, given that a significant interaction effect was found between the factors of focus and frame.

IX. Discussion

At this point we are only able to theorize as to why the study produced the aforesaid results. In terms of the loss-framed advertisement’s success when focused on the individual, it can be asserted that to a certain


degree most people are egocentric and look out primarily for their own interests before the interests of others. Many times, individuals will go to great lengths to protect themselves from potential harm. The gain-frame advertisement showed the best results when the message was focused on others. Since this communication was focused on “doing good” for others, it can be posited that the motivation for the success of this ad is stimulated by social influences. When individuals know that they will be observed by members of their community or others around them, there is most likely more motivation for them to “do good” for others due to the perception of them that will be created by onlookers. Here too the results reflect egocentrism. To further this research and to investigate the results more deeply, the following steps need to be implemented:

o Investigate the underlying mechanisms of the frame x focus interaction effect.

o Study the effects proposed here in a

different context (e.g., online sharing of copyrighted materials, pharmaceuticals, etc.).

o Demonstrate the link between perception

of morality (our index) of counterfeit consumption and actual counterfeit consumption.

X. Possible Industry Contributions

Due to the serious nature of the counterfeiting problem in America and around the world, once measures are taken to deepen our knowledge of the given results, this study has the potential to influence businesses, governments, and consumers alike. Though advertising mechanisms are only a small portion of the many anti-counterfeiting tactics, this study seeks to build on the knowledge of this industry in ways that have never been attempted before. “To our knowledge there have been no studies that have addressed the effectiveness of these [anti-counterfeiting] messages in deterring the growth of counterfeit trade” (Chaudhry and Zimmerman, 2009, pp. 92). Thus, this study will be of value to professionals in the


luxury goods industry as well as those conducting scholarly research. The more that is learned about this phenomenon, the better chance luxury brand companies have at slowing the growth of the counterfeit goods industry, thus preserving their brand equity, consumer confidence, and revenues. Ideally, this study will provide both professionals in the luxury goods industry and researchers with concrete evidence on the effectiveness of employing an advertising approach to educate consumers and influence purchase behavior. Building awareness of an issue such as piracy within a city, or even a smaller community, can take years, if not decades (Chaudhry and Zimmerman, 2009, pp. 92). Acknowledging that the turnaround will not be quick is part of this research: just as this study seeks to raise awareness about the consequences of purchasing counterfeits, it also draws a parallel to the scholarly community; creating a spark of awareness of prevention measures can lead to them being publicly implemented. If nothing else, this study can draw more interest to the topic at hand, with hopes of igniting conversation and scholarly interest, paving the way for future research on curtailing counterfeit consumption.

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Appendix A


Appendix B


Appendix C


Appendix D

39Fordham Business Student Research JournalAppendix E


Appendix F-1


Appendix F-2


Appendix F-3


Figure 1 (ANOVA – 2x2 Focus)


Figure 2 – Comparison of Means


Figure 3 – Comparison to the Control

Control line = (M) =3. 28

Standard Deviation = 1.28


FUND-MANAGEMENT GENDER COMPOSITION: THE IMPACT ON RISK AND PERFORMANCE OF MUTUAL FUNDS AND

HEDGE FUNDS

Angela Luongo

Abstract

This paper examines gender differences in fund managers’ risk tolerance and performance. We explore these differences in both the universe of U.S. mutual funds and hedge funds using risk and performance metrics that cover one-year, three-year, and five-year horizons. We find that funds managed by women outperform those managed by men with less risky portfolios. The outperformance persists after adjusting for risk. Overall, the results indicate that female fund managers are severely underrepresented despite their quality performance. A workgroup comprised more equally of male and female managers is likely to lead to greater stability in the financial markets due to a better blend of investment approaches and risk tolerances.


Introduction

Women are fading from the U.S. finance industry. In the past 10 years, 141,000 women, or 2.6% of female workers in finance, left the industry.

The ranks of men grew by 389,000 in that period, or 9.6%, according to a review of data provided by the federal Bureau of Labor Statistics. Since 2000, the number of women between the ages of 20 and 35 working in finance has dropped by 315,000, or 16.5%, while the number of men in

that age range grew by 93,000, or 7.3%.

Given recent volatile markets and much scrutiny over reckless risk-taking, these gender shifts are intriguing. Sizeable psychological research focused on overconfidence and gender biases, which will be reviewed in the subsequent section, documents that men tend to be overly confident and risk-seeking, whereas women tend to be risk-averse, especially in male-dominated areas such as finance. In an environment where individuals are offered excessive incentives for risk-taking, an analysis of over-confidence, gender bias, and risk characteristics in mutual funds and hedge funds warrants further research.

The current study is unique. Using data for one-year, three-year, and five-year horizons, we are able to analyze market participants’ reactions to huge market swings, specifically the 2008 financial crisis, and whether males and females react differently. Although sizable literature already documents that differences in risk propensity between men and women exist, we have yet to find research outlining these biases for fund managers during a financial crisis. We question whether stereotypical economic behavior anomalies between men and women, such as overconfidence and gender bias, hold during economic turbulence. Having concluded that males and females do indeed react differently, while simultaneously finding that female fund managers are underrepresented, we argue that a work environment composed more equally of male and female fund managers is likely to promote stability in the financial markets.



A. The Efficient Market Hypothesis

The efficient market hypothesis (EMH) has been a central component of modern finance for several decades. Eugene Fama defines an efficient financial market in his classical statement as one in which security prices always fully reflect available information. Therefore, a market is efficient if security prices adjust rapidly to the arrival of new information. Fama states that the EMH “rules out the possibility of trading systems based only on currently available information that have expected profits or returns in excess of equilibrium expected profit or return” (Fama 1970). The aforementioned statement is profound, for it asserts that an average investor will not be able to consistently beat the market; if EMH holds, an investor should passively hold the market portfolio, as opposed to actively managing his or her money.

The theoretical foundation for the EMH has three main arguments to support it. First, investors are rational; hence, they value securities rationally. Second, if some investors are not rational, then their trades are not and therefore, cancel each other without affecting prices. The second argument relies heavily on the assumption that irrational investors have uncorrelated trading strategies. Third, if investors are irrational in similar ways, then they are met in the market by sophisticated investors, who eliminate their influence on prices. Specifically, even if irrational investors have correlated trading strategies, rational arbitragers will reset prices to equilibrium (Fama 1965). Consequently, the two broad predictions of the EMH are the quick and accurate reaction of security prices to information, and that prices should not react to changes in supply or demand of a security that are not accompanied by news about the security’s fundamental value.

The empirical foundations of the EMH are stated in three forms: weak form, semi-strong form, and strong form. The three forms of EMH allow Fama to distinguish between three types of “stale” information, which are of no value to those who wish to make money, that is, to make a superior return after an adjustment for risk. The weak form EMH states that current prices reflect all security-market information. Therefore, the relevant stale information is characterized as past prices and returns. The weak-form


EMH implies that past rates of return and other market data should have no relationship with future rates of return. This form of EMH reduces the “random walk hypothesis,” which Fama defines as the statement that stock returns are entirely unpredictable based on past returns (Fama 1965). The overall evidence supports the weak form of EMH. Fama has found no systemic evidence of profitability of “technical” trading strategies (Fama 1965).

The semi-strong form EMH states that current security prices reflect all past market information, as well as all public information. As soon as information becomes publicly available, the information is immediately incorporated into prices; hence, the semi-strong form EMH implies that decisions made on new information after it is public should not lead to above-average risk-adjusted profits from those transactions. The overall evidence for the semi-strong form EMH is mostly supportive. An event study conducted by Keown and Pinkerton (1981) analyzed the returns to targets of takeover bids around the announcement of the bid. The researchers show that share prices of targets begin to rise prior to the announcement of the bid as the news of a possible bid is incorporated into prices, and then jump on the date of the public announcement to reflect the takeover premium offered to target firm shareholders. Nonetheless, Keown and Pinkerton’s data shows that the jump in share prices on the announcement is not followed by a continued trend upward or downward, indicating that prices of takeover targets adjust to the public news of the bid instantaneously, consistent with the semi-strong form EMH. Additionally, the substitution hypothesis is consistent with the semi-strong form EMH that stock prices do not react to non-information (Scholes 1972). Scholes’ work dealt with the central issue to the arbitrage arguments in the efficient markets hypothesis, the availability of close substitutes for individual securities. When arbitrage is needed to make markets efficient, individual stocks must have close substitutes for such arbitrage to work properly. When close substitutes are available, arbitragers can sell overpriced securities and buy cheaper close substitutes, equalizing their relative prices and making markets efficient. If stocks do not have close substitutes, investors become indifferent as to which stock to hold. Consequently, Scholes illustrates the willingness of investors to adjust their portfolios to absorb more shares without a larger influence on the price.

The strong-form EMH states that stock prices reflect all information from past market information and private information. It implies that no


group of investors should be able to consistently derive above-average risk-adjusted rates of return, even if they are trading on information that is not yet known to all market participants; insiders’ information quickly leaks out and is incorporated into prices. The strong form of EMH assumes perfect markets where information is cost-free and available to everyone at the same time. The overall evidence for strong-form EMH is mixed.

B. Behavioral Finance Casts Doubt on Rational Expectations

The notion that investors are fully rational is difficult to sustain. Therefore, Fischer Black (1986) illustrates that many investors react to irrelevant information in forming their demand for securities; they trade on “noise” rather than information. By reacting to this “noise,” investors are not abiding by the passive strategies Fama expected of market participants.

Individuals deviate from rational decision-making in their attitudes toward risk, expectation formation, and framing of problems. First, according to “prospect theory,” individuals do not assess risky gambles following the precepts of rationality; that is, people do not look at the levels of final wealth they can attain. Instead, people look at gains and losses relative to some reference point, which may vary from situation to situation, and display loss aversion, meaning individuals are risk-averse over gains, but risk-seeking over losses (Kahneman and Tversky 1979). Second, individuals try to predict future uncertain events by taking a short history of data and asking what broader picture this history represents; therefore, people often do not pay attention to the possibility that the recent history is generated by chance rather than by the implicit model they are constructing (Kahneman and Tversky 1973). Third, in choosing investments, investors allocate more of their wealth to stocks rather than bonds when they see a very impressive history of long-term stock returns relative to those of bonds, even though they only see the volatile short-term stock returns (Benartzi and Thaler 1995).

Individuals are not the only investors whose trading strategies are difficult to reconcile with rationality. Professional managers contribute much of the money in the financial markets for individuals and corporations. Not only are professionals subject to the same biases as individual investors, but as agents managing other people’s money, their


role introduces further distortions into their decisions relative to what a fully informed sponsor might wish (Lakonishok, Shleifer, and Vishny 1992). For instance, in order to minimize the risk of underperforming their benchmarks, portfolio managers may “herd,” that is, select stocks other managers have selected, or choose portfolios that are close to their benchmarks. Moreover, professional portfolio managers may add stocks to their portfolio that have recently done well, and sell stocks that have recently done poorly, in order to impress investors who receive end-of-quarter and end-of-year reports on portfolio holdings (Lakonishok et al. 1991).

The understanding of limited arbitrage, combined with an understanding of investor sentiment, helps individuals generate predictions about the behavior of security prices and returns. This is precisely where behavioral finance comes into play. The theoretical argument for the EMH depends on the effectiveness of arbitrage, taking the other side of an unsophisticated demand for securities in order to return prices to their fundamental values. First, behavioral finance argues that limited substitutes for many securities are not always available, making arbitrage risky and limited. Even when substitutes are available, risk is not always completely eliminated with arbitrage; prices do not converge to fundamental values instantaneously. Therefore, prices do not adjust to information as they should. In fact, prices may react to irrelevant information, causing unnecessary changes in demand. Second, in order to understand the form market inefficiency might take, one must understand investor sentiment, how investors actually form their beliefs and demands for securities. By understanding investor sentiment, one comes to understand the disturbances to efficient prices, the common judgment errors made by a substantial number of investors, rather than the uncorrelated random mistakes.

C. Overconfidence and Activity in the Financial Markets

Overconfidence is a well-established bias characterized by an individual’s subjective confidence in the accuracy of his or her own judgments, as compared to objective accuracy. Research of the calibration of these subjective probabilities supports the idea that people tend to overestimate their knowledge and abilities. In a confidence-intervals task, subjects were asked to record their judgmental fractals for several quantities unknown to them at the time of assessment. Prior to their participation in the training exercise, all of the subjects were exposed to


basic fundamental biases. Nonetheless, subjects still showed a high degree of overconfidence (Alpert and Raiffa 1982). For instance, Alpert and Raiffa found that the forecasted 99% intervals of individuals included the true quantity only approximately 60% of the time. If individuals were well calibrated, the number of future values that fall outside the estimated 99% confidence interval should be approximately 1 out of 100. The high reported values indicate that individuals perceive that they can estimate future values with much greater accuracy than is actually the case. In fact, subjects tended to be overconfident on the hard profiles and underconfident on the easy profiles. Consequently, overconfidence appears to be greatest for difficult tasks, as well as for tasks with low predictability, and sluggish, unclear feedback (Fischhoff, Slovic, and Lichtenstein 1977; Lichtenstein, Fischhoff, and Phillips 1982; Griffin and Tverksy 1992). Upon selecting a particular security in which to invest, an investor will not receive clear and concise feedback in a quick fashion. Due to low predictability and “noisy” feedback, one may conclude that stock selection is a difficult task, and therefore a task for which people are most overconfident. In order to calculate the amount by which an overconfident investor overestimates his or her precision of knowledge, Odean has developed a new model of overconfidence (1998). Odean concludes that overconfidence may result from investors overestimating the precision of their private signals, or overestimating their abilities to correctly interpret public signals. Moreover, overconfident investors strongly believe their personal assessments of a security’s value are more accurate than the assessments of others; thus, overconfident investors become strongly attached to their own valuations, and are less concerned with the valuations of others.

The aforementioned concept is referred to as “difference in opinion.” Varian focuses on differences in prior beliefs as opposed to differences in models. Varian shows “the relationship between the equilibrium price and volume of trade and the equilibrium probability beliefs about those assets” (1989). Harris and Raviv, on the other hand, provide a model of speculative trading volume and price dynamics (1993). They show that trading is generated by differences of opinion among traders regarding the value of the asset being traded. These differences of opinion result from different interpretations of public information. The authors assume that traders are rational in their model, meaning “all the behavior in the model is maximizing,” in order to help explain the observed behavior of speculative markets. Harris and Raviv are able to


ignore learning from market prices and to dispense with noise traders in their differences-of-opinion model.

Grossman and Stiglitz create a model as an extension of the noisy rational expectations model (1980). Their results indicate that there is “an equilibrium degree of disequilibrium;” rational investors only trade and only purchase information when doing so increases their expected utility. Therefore, prices partially reflect the information of informed individuals, arbitragers, so that those who incur costs to obtain information do receive compensation. However, overconfident, irrational investors lower their expected utility by trading too frequently. According to Odean, overconfident investors are unrealistic; they overestimate the likelihood that they will reap unrealistically high returns and their ability to precisely estimate these high returns. Additionally, Odean concludes that overconfident investors expend too many resources, such as time and money, on investment information. Moreover, overconfident investors hold riskier portfolios than rational investors even when both the overconfident investors and the rational investors have the same degree of risk aversion (1998).

Finally, research concludes that investors decrease their expected utility by trading too much (Odean 1999; Barber and Odean 2000). In his study conducted in 1999, Odean finds that the individual securities investors buy underperform those they sell. When he controls for liquidity demands, tax-loss selling, rebalancing, and changes in risk aversion, the investors underperform even more, which suggests that investors are willing to act on too little information and are willing to act even when they are wrong. With a different data set, Barber and Odean show that after accounting for trading costs, individual investors underperform their benchmarks. The researchers also discover, as the model of overconfidence predicts, that those who trade more frequently realize the worst performance.

D. Gender and Overconfidence

Overconfidence is evinced in both men and women; however, men are generally more overconfident than women (Lundeberg, Fox, and Puncochar 1994). Discussions of gender differences in overconfidence often lead to task analysis, as research concludes these differences are highly task dependent (Lundeberg, Fox, and Puncochar 1994). Lundeberg, Fox, and Puncochar base their research on a study conducted by Kay Deaux and Elizabeth Farris (1977), who confirmed that, in general, men


often claim more ability than do women. The differences in overconfidence are greatest for tasks perceived to be “masculine” (Deaux and Farris 1977).

Finance is considered to be a masculine task; thus, men tend to feel as though they are more competent in dealing with financial matters than do women (Prince 1993). As a result, men are heavily represented in the financial services industry. Additionally, Leeney provides all the more reason to expect that men are more overconfident than women in their ability to make decisions regarding stock investment. According to Leeney, gender differences in self-confidence depend on the lack of clear and unambiguous feedback. When feedback is “unequivocal and immediately available, women do not make lower ability estimates than men. However, when such feedback is absent or ambiguous, women seem to have lower opinions of their abilities and often do underestimate relative to men” (Leeney 1977). Feedback in the financial markets is certainly unclear, which leads females to question their abilities.

The source of investor overconfidence is the self-serving attribution bias (Gervais and Odean 1998). In this model, investors infer their own abilities from their successes and failures. Due to their tendency to take too much credit for their successes, they become overconfident. Research illustrates that the self-serving attribution bias is greater for men than for women; therefore, women are likely to become less overconfident than men. Because men are more overconfident than women, men will trade more frequently than women (Barber and Odean 2001). Research conducted by Barber and Odean demonstrates that trading reduced men’s net returns by 2.65% a year as opposed to 1.72% for women (2001).

E. Gender and Risk Tolerances

According to Slovic, a cultural belief exists that men should, and do, take greater risks than women (1966). This assumption is consistent with Grable’s finding that males have higher propensities for risk than females (2000). However, when comparing risk tolerances of males and females toward abstract and contextual situations, the results deviate from previous findings. Male and female subjects do not differ in their risk propensities toward decisions; yet, in abstract situations, differences in risk propensity do arise. Additionally, the comparative risk propensity of male and female subjects in financial choices strongly depends on the decision frame. Gender-specific risk propensities arise in abstract gambles, with men being more risk-prone toward gains and women more risk-prone toward


losses. The aforementioned results appear to question the relevance of stereotypical gender-specific risk attitudes (Schubert, Brown, Gyslet, and Brachinger 1999). Those who study the link between gender and investment prowess say risk management is key to the success of female money managers. Therefore, women are not necessarily afraid of risk; they are just better at managing it (Denmark 2009).

F. The Market’s Perception of Female Managers

Women are expected to be more conservative investors than men and are consequently offered investments with lower risk and therefore lower expected returns (Wang 1994). Nonetheless, the market favorably greets the news of selecting a female CEO with statistically significant abnormal stock-price reactions. Tests of the difference between valuation effects of female and male CEO appointments show there is no significant difference, indicating that financial market participants are not less confident in female CEOs (Martin, Nishikawa, and Williams 2009). The researcher of the current study questions whether Martin, Nishikawa, and Williams’ finding will hold when referring to female investment managers, due to the fact that they are directly managing money matters. Using data from the U.S. mutual fund industry, research illustrates that although female and male managers do not differ in average performance, female managers receive significantly lower inflows, suggesting that female managers may be stereotyped as less competent (Niessen and Ruenzi 2007).

II. Research Questions

The researcher poses the following questions: 1. Has the perception that female portfolio managers are more

risk-averse than male managers diminished as cultural advancement has shattered glass ceilings?

2. Can a work environment comprised more equally of males and females create greater stability in the financial markets, due to a better blend of investment approaches and risk tolerances?

3. Could this greater stability in the financial markets prevent future crises?


III. Hypotheses

The following testable hypotheses are the focus of the present inquiry:

1. Portfolios of female managers of mutual funds and hedge funds have higher annualized returns than those of male managers of mutual funds and hedge funds. Annualized returns are absolute returns over a specified period aggregated to a period of one year. Annualized returns are used for the purpose of comparing returns over different periods.

2. Portfolios of male managers of mutual funds and hedge funds have higher standard deviations ( ) of monthly returns than those of female managers of mutual funds and hedge funds. The standard deviation is a statistical measure applied to the weekly, monthly or annual rate of return of a portfolio to measure its volatility. Standard deviation explicates historical volatility and is used by portfolio managers to estimate the amount of expected volatility. Funds with large standard deviations deviate from the expected returns, and are characterized as riskier portfolios.

3. Portfolios of male managers of mutual funds and hedge funds assume more idiosyncratic risk, demonstrated by the R-squared (R2) statistic, than those of female managers of mutual funds and hedge funds. R2 is a percentage of systematic risk to total risk. A large R2 figure indicates that the portfolio’s idiosyncratic risk is small. One may mitigate idiosyncratic risk, also known as nonsystemic risk, through diversification.

4. Portfolios of female managers of mutual funds and hedge funds have greater Sharpe ratios than those of male managers of mutual funds and hedge funds due to smart investment decisions, not as a result of excess risk. The Sharpe ratio measures risk-adjusted performance. The ratio is calculated by subtracting the risk-free rate from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns. The Sharpe ratio demonstrates whether a portfolio’s returns are due to smart investment decisions or a result of excess risk. Therefore, the greater a portfolio’s Sharpe ratio, the better its risk-adjusted performance.


5. The female presence, that is, the proportion of females to males, in mutual funds is larger than that of hedge funds, due to the basic nature of hedge funds (i.e. high risk profiles).

IV. Data and Methodology

The data used for this research is secondary data, gathered from the Bloomberg terminal database. The universe includes U.S. mutual fund data and U.S. hedge fund data compiled using the Bloomberg fund screening function, “FSRC.” For each fund, Bloomberg provides information dealing with the fund’s holdings, domicile, country of availability, fund manager, etc. All of the screening criteria used for this study, and descriptions of each, can be found in Appendix A. Two sample data sets are used. The sample set of data for hedge funds include information for 5,022 funds. The sample set of data for mutual funds include 72,271 funds. Not all 77,293 funds are used in this research. Many funds do not include the manager name. For those that do, we only use the mutual funds and hedge funds for which we are able to identify the gender of the manager. If the gender of a manger cannot be determined for a particular fund, it is eliminated. Therefore, the 4,980 mutual funds and 2,962 hedge funds that remain are the funds used in the research. Using Excel, we sort each data set by gender. For each screening criteria within both data sets, the means are taken for the funds managed by women and men. The two-tailed heteroscedastic t-test is used to assess whether the differences between the means of the two groups are statistically significant. Using SAS, we calculate the percentage of female managers to male managers. Additionally, we use SAS to control for Firm Assets Under Management and Management Style for gender comparisons. When controlling for AUM, the following criteria are analyzed in the mutual fund data set: Total Return, Standard Deviation, and Sharpe Ratio. For hedge funds, the following criteria are analyzed: Total Return, Standard Deviation, Sharpe Ratio, and R-Squared.

V. Data Analysis

A. Mutual Funds

Figure 1 presents the results for testing the hypothesis that funds managed by female managers exhibit lower total risk over one-year, three-


year, and five-year periods. For the one- year period, we have 4,214 male managers and 293 female managers; for the three-year period, we have 3,357 male managers and 246 female managers; and for the five-year period, we have 2,585 male managers and 204 female managers, for which we have standard-deviation data for fund returns. The average standard deviation is higher for male managers for all three test periods, and the difference is statistically significant with a 5% significant level. Note that the in-group standard deviation is higher for male managers than for female managers, illustrating that male-managed funds are more heterogeneous in their risk exposure. One possible reason for this is the fact that male-managed funds cover a broader range of investment styles than female-managed funds.

Figure 1

Figure 2 examines differences in systematic risk between male- and female-managed funds. We measure systematic risk by beta. Beta measures the exposure of the fund for market moves. Here, we have fewer funds with reported beta. For the one-year period, we have 2,285 male managers and 197 female managers; for the three-year period, we have 2,016 male managers and 172 female managers; and for the five-year period, we have 1,780 male managers and 151 female managers. Female-managed funds have lower systematic risk, especially over the one-year period. The higher beta for male-managed funds reflects either high market exposure or high leverage. However, none of the differences passes the 5% significance test. It is not clear whether the lack of significance is due to smaller sample sizes.

Statistics Male Female T-test ProbOne year monthly N 4214 293One year monthly Mean 17.41560038 16.50331058One year monthly Standard Deviation 14.06585092 6.16270063 0.0303634

Three year monthly N 3357 246Three year monthly Mean 24.12200775 22.92475610Three year monthly Standard Deviation 15.06324513 8.50944204 0.04732210

Five year monthly N 2585 204Five year monthly Mean 20.11493230 18.77171569Five year monthly Standard Deviation 10.46928956 7.08305551 0.01294118

Standard Deviation


Figure 2

The results in Figure 2 tempt us to conclude differences in total risk are driven by differences in systematic risk. Figure 3 confirms this hypothesis. In Figure 3 we examine differences in R2. Recall that R2 measures the ratio of systematic risk to total risk. Thus, 1-R2 measures the ratio of unsystematic risk to total risk. Higher R2 implies lower systematic risk as a percentage of total risk. We have almost the same funds in the sample as those in Figure 2. The differences in R2 are significant for one-year and three-year periods and border significance for the five-year period.

Figure 3




Beta

Statistics Male Female T-test ProbOne year monthly N 2289 199One year monthly Mean 0.78499782 0.86929648One year monthly Standard Deviation 0.29439818 0.15042535 3.41238E-11



R-Squared


Figure 4 presents the results for testing the hypothesis that funds managed by female managers outperform their male counterparts, as measured by total returns, over one-year, three-year, and five-year periods. For the one-year period, we have 4,237 male managers and 296 female managers; for the three-year period, we have 3,372 male managers and 248 female managers; and for the five-year period, we have 2,602 male managers and 204 female managers. The average annualized total returns for portfolios managed by female managers are higher than those of portfolios managed by male managers for all three test periods, and the mean differences are statistically significant. Note that the in-group standard deviations are higher for male-managed funds across all three time periods; this indicates that returns across all male-managed funds are more heterogeneous than returns across all female-managed funds. Moreover, the three-year results are influenced by the 2008 financial crisis. Female-managed funds still had higher returns than male-managed funds. The results in Figure 4 suggest that female managers make more consistent investment decisions. This may be a more positive trait, especially during a market collapse, than the more aggressive disposition of male managers, as demonstrated in the figures on risk above.

Figure 4




Total Returns


Figure 5 presents results that compare the average alpha for male-managed and female-managed funds. Alpha is the fund’s return adjusted for beta risk. The mean for female-managed funds over the one-year period, 23.8%, far exceeds its male counterpart of 8.3%. While the mean difference is large, it is statistically not significant. Note the in-group standard deviation of the male-managed funds is far larger than its female counterpart. This indicates that the male-managed funds are very heterogeneous compared to the female-managed funds. Such large standard deviation is the result of failing to reject the null hypothesis at a 5% significance level. We reject the null hypothesis with a 15.6% significance level. For the three-year period, the mean difference tilts toward the female-managed funds; yet, the difference is less striking and statistically insignificant.

Figure 5

Figure 6 presents the results for testing the hypothesis that funds managed by female managers exhibit higher Sharpe ratios over one-year and three-year periods. For the one-year period, we have 4,213 male managers and 293 female managers; for the three-year period, we have 3,356 male managers and 246 female managers. The higher in-group standard deviation for male managers than for female managers illustrates, as previously stated, that male-managed funds are more heterogeneous in their risk exposure. We conclude that mutual funds managed by women have better risk-adjusted performance; superior returns are due to smart investment decisions, not a result of excess risk.



Alpha


Figure 6

B. Hedge Funds

Due to the small pool of female managers within the hedge fund data set, some results are not statistically significant. Additionally, note that beta is not available in the hedge-fund data as most hedge funds target zero beta, that is, zero exposure to obvious risk factors, such as equity indices, for their funds.

Figure 7 presents the results for testing the hypothesis that funds managed by female managers exhibit lower total risk over one-year, three-year, and five-year periods. For the one-year period, we have 3,980 male managers and 137 female managers; for the three-year period, we have 2,592 male managers and 91 female managers; and for the five-year period, we have 1,453 male managers and 46 female managers, for which we have standard-deviation data for fund returns. The average standard deviation is higher for male managers for all three test periods, and the difference is statistically significant with a 5% significant level. Note that the in-group standard deviation for male managers is almost twice as high as that for female managers. This illustrates that male-managed funds are more heterogeneous in their risk exposure. As stated previously, a possible reason for this is the fact that male-managed funds cover a broader range of investment styles than female-managed funds.



Sharpe Ratio


Figure 7

The findings support the hypothesis that hedge funds managed by women are less risky than those managed by men. Figure 8 shows that in the short term, female-managed funds exhibit less R2 than male-managed funds. Note that 1- R2 measures the percentage of unsystematic risk to total risk. For the one-year period, male-managed funds have less unsystematic risk than female-managed funds. In fact, 69.5% of the risk is unsystematic for male-managed funds, while 94.4% of the risk is unsystematic for female-managed funds. Given that female-managed funds have lower overall total risk, it must be the case that female-managed funds have lower systematic risk than their male counterparts. For three-year and five-year periods, we accept the hypothesis that male- and female-managed funds have similar percentages of unsystematic risk relative to total risk. Given that female-managed funds have lower total risk, funds managed by women are likely to have lower systematic risk.




Standard Deviation


Figure 8

Figure 9 presents the results for testing the hypothesis that funds managed by female managers outperform their male counterparts, as measured by total returns, over one-year, three-year, and five-year periods. For the one-year period, we have 4,027 male managers and 138 female managers; for the three-year period, we have 2,611 male managers and 93 female managers; and for the five-year period, we have 1,474 male managers and 47 female managers. We conclude that female managers are severely underrepresented in U.S. industry. As a result, very few data regarding female-managed funds’ total returns are available. Although the results support our hypothesis, the mean differences between male- and female-managed funds are not statistically significant.

Figure 9




Total Returns




R-Squared


Figure 10 presents results that compare the average alpha for male-managed and female-managed funds. Recall that alpha is the fund’s return adjusted for beta risk. The mean for female-managed funds over the one-year period, 15.9%, exceeds its male counterpart of 12%. However, the mean difference is statistically not significant. Note that the in-group standard deviation of the male-managed funds is far larger than that for female-managed funds. This indicates that the male-managed funds are very heterogeneous compared to the female-managed funds. For the three-year period, the mean for female-managed funds is 69%. This is more than twice the mean of male-managed funds at 27.7%. Although the difference is striking, it is statistically insignificant. Again, we find that the male-managed funds are very heterogeneous compared to the female-managed funds due to much larger in-group standard deviation. Such large standard deviation is the cause of failing to reject the null hypothesis at a 5% significance level. We reject the null hypothesis with a 12.5% significance level.

Figure 10

Figure 11 presents the results for testing the hypothesis that funds managed by female managers exhibit higher risk-adjusted performance, measured by the Sharpe ratios, over one-year and three-year periods. We find that in the short term, funds managed by women have higher Sharpe ratios than those managed by men. However, for the three-year period, funds managed by women have lower Sharpe ratios than funds managed by men. Nonetheless, the results are not statistically significant for either time period. Note that the Sharpe ratio is accentuated by investments that don’t have a normal distribution of returns. Many hedge funds use dynamic trading strategies and options that give way to skewness and kurtosis in their distribution of returns.



Alpha


Figure 11

C. Female Presence

As hypothesized, the female presence in mutual funds was larger than that in hedge funds; however, the difference was not as large as anticipated. The female presence in mutual funds was 8.72%; the female presence in Hedge Funds was 4.25%. The small sample size of females strengthens the argument that female fund managers are underrepresented in both mutual funds and hedge funds.

D. Control for Firm Assets Under Management

We observe that female fund managers are concentrated in funds with lower levels of Assets Under Management (AUM) (Figure 12), insinuating female managers are more likely to be hired by small firms. Given the concentration of female managers in funds with relatively low AUM, we were concerned that if funds with low AUM outperform those with large AUM, then gender difference would be confounded with AUM differences. Within our small subset of funds, there are no significant differences in return and risk between funds with low levels of AUM and high levels of AUM (Appendix B). Therefore, in our sample, the gender differences are not driven by AUM differences.



Sharpe Ratio


Figure 12

While this suggests the results of the current study are likely to be

robust, there is a limitation in the data. Controlling for AUM with more data may change this study’s conclusion.

E. Control for Management Style

Concerned that different styles may exhibit different risk-return profiles, we control for management style as defined by Bloomberg (Figures 13, 14, and 15). We find that female portfolio managers are concentrated in only three strategies: Sector Funds (Equity funds), Total Returns (Debt funds), and Value. Therefore, it is difficult to control for fund management strategy. Fuller data sets for future research may change this study’s conclusion.

Statistics Male Female T-test ProbN 24 2

Mutual Funds Mean 518.70 101.55Standard Deviation 1335.87 143.05 0.1664

N 352 12Hedge Funds Mean 46824.75 528.79

Standard Deviation 235866.38 902.59 0.0003

AUM (millions)


Figure 13

-------Std Dev 1Y M--------

Gender Management Style N Mean Std Dev

Female Sector Funds (Equity funds) 42 19.3214286 4.25943691

Female Total Return (Debt funds) 24 8.2066667 1.17741673

Female Value 36 19.3794444 3.25015511

Male Sector Funds (Equity funds) 364 20.4550275 4.88703415

Male Total Return (Debt funds) 209 9.5789952 9.20900722

Male Value 560 20.1839464 6.44725091

Figure 14

Least Squares Means

Std Dev 1Y M LSMEAN

Gender Management Style LSMEAN Number

Female Sector Funds (Equity funds) 19.3214286 1

Female Total Return (Debt funds) 8.2066667 2

Female Value 19.3794444 3

Male Sector Funds (Equity funds) 20.4550275 4

Male Total Return (Debt funds) 9.5789952 5

Male Value 20.1839464 6


Figure 15

Least Squares Means for effect Manager Gender * Management Style

Pr > |t| for H0: LSMean(i)=LSMean(j)

Dependent Variable: Std Dev 1Y M

i/j 1 2 3 4 5 6

1 <.0001 0.9683 0.2790 <.0001 0.4014

2 <.0001 <.0001 <.0001 0.3217 <.0001

3 0.9683 <.0001 0.3380 <.0001 0.4664

4 0.2790 <.0001 0.3380 <.0001 0.5308

5 <.0001 0.3217 <.0001 <.0001 <.0001

6 0.4014 <.0001 0.4664 0.5308 <.0001

VI. Conclusion

This paper contributes to the existing literature discussing economic behavior anomalies; the current study examines the relationship between risk and performance of U.S. mutual funds and hedge funds and the portfolio manager’s gender. Although sizable literature already documents that men tend to be overly confident and risk-seeking, whereas women tend to be risk-averse, we have yet to find research outlining these biases during a financial crisis. Having gathered data for one-year, three-year, and five-year horizons, we are able to analyze whether males and females react differently to huge market swings; three-year results are influenced by the 2008 financial crisis. We find that female managers are, in fact, more risk-averse than male managers. The results indicate that a work environment comprised more equally of male and female portfolio managers is likely to create more stability in the financial markets, due to a better blend of investment approaches and risk tolerances.

Additionally, we observe that female fund managers are concentrated in funds with lower levels of Assets Under Management (AUM). This is


due to the fact that female managers are more likely to be hired by small firms. Given the concentration of female managers in funds with relatively low AUM, we were concerned that if funds with low AUM outperform those with large AUM, then gender difference would be confounded with AUM differences. Within our small subset of funds, we find no significant differences in return and risk between funds with low levels of AUM and high levels of AUM. Therefore, in our sample, the gender differences are not driven by AUM differences. We conclude that if female managers outperform male managers, they should attract more funds because people seek better returns.

Despite so-called “shattering the glass ceiling,” female managers are drastically underrepresented, which begs the question: must female managers be “exceptional” to land positions in the first place? And, are they held to a higher standard once they do secure these positions? Given that women who manage to break through harder barriers to become portfolio managers are more exceptional than their male counterparts, it is possible that when women get to have equal opportunity to be hired like men, they may lose part or perhaps all their advantage. However, this question cannot be answered until we have a far more balanced workforce of fund managers. The study should be examined with fuller data sets and more females in the industry to examine the robustness of these results.


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Appendix A. Descriptions of Screening Criteria1

A. Management

Fund Manager: Person or persons that make daily investment decisions for the fund. Fund Manager Start Date—The date that the manager begins managing the fund. B. Classifications (Prospective Based)

Management Style: The investment strategy the manager implements for investment decisions, as stated in the prospectus. Strategy: The investment strategy the manager concentrates on for investment opportunities, as stated in the prospectus or offering memorandum. C. Assets

Firm Assets Under Management: The total assets under management by the investment manager/investment advisor. This includes assets within funds and separately managed accounts. This field displays U.S. dollars (millions). D. Quantitatives

Total Return 1Y (Performance Metric): One-year total return of a security as of the date of the last close price. Start date is the first business day on or before 12 months (to the date) prior to the ending date (as of date). The return combines price appreciation (or depreciation) and dividend distributions. The dividends are reinvested back into the security. If the ending date is the last day of the month, the start date is derived using end-of-month conventions. Total Return 3Y/5Y Ann (Performance Metric): The three-year, five-year annualized return on the security including appreciation and dividends, assuming the dividends are reinvested back into the security. If no price is available on the start or end date of the current period, the calculation will look to the fund-pricing frequency for a valid price. If the fund prices daily, the calculation will look back three

1 Descriptions provided by Bloomberg


business days for a price. If the fund prices weekly, the calculation will look back seven business days for a price. If the fund prices infrequently, the calculation will look back a maximum of 30 business days for a price. If no valid price is found, then N.A. will be returned. Standard Deviation (Risk Metric): Volatility from the average of returns of defined granularity over time frame specified. It measures how widely spread the values in a period are. The bigger it is, the most risky is the security.

• 1Y Monthly Annually (Std Dev 1Y-M)

• 3Y Monthly Annually (Std Dev 3Y)

• 5Y Monthly Annually (Std Dev 5Y)

Sharpe Ratio (Risk/Return Metric): A risk-adjusted measure developed by William F. Sharpe that calculates the excess performance with respect to the Risk Free Rate (in our case the yield three months linked to the currency), per unit of volatility over the time frame specified. Performance is measured as mean return. Components are annualized. The higher the Sharpe ratio, the better the fund’s historical risk-adjusted performance.

• Sharpe 1Y Monthly

• Sharpe 3Y Monthly

• Sharpe 5Y Montly

R-squared (Tracking and Correlation Metric): A measurement of how well a security’s performance correlated with the performance of a benchmark index, such as the S&P 500, and thus a measurement of what portion of its performance can be explained by the performance of the overall market or index. Values for r-squared range from 0 to 1, where 0 indicated no correlation and 1 indicates perfect correlation.

• 1Y Weekly

• 3Y Monthly

• 5Y Monthly


Alpha (Tracking Metric): Intercept of the regression line of the security and benchmark returns of defined granularity over time frame specified. A coefficient which measures risk-adjusted performance, factoring in the unsystemic risk, rather than market risk (systemic risk). An indication of whether a security is undervalued or overvalued in relation to other securities with similar systemic risk.

• 1Y Monthly

• 3Y Monthly

• 5Y Monthly

Beta (Tracking Metric): Slope of the regression line of the security and benchmark returns of defined granularity over time frame specified. A coefficient which measures systemic risk. A beta over 1 is more volatile than the overall market, while a beta below 1 is less volatile.

• 1Y Monthly

• 3Y Monthly

• 5Y Monthly

Appendix B. Control for Firm Assets Under Management

A. Mutual Funds

Total Return 1Y

Estimate Standard Error t Value `Pr > |t|AUM --- 15.663 0.25327954 61.84 <.0001AUM High 31.465 7.11327811 4.42 <.0001AUM Low 15.1573 3.03311198 5.00 <.0001

GLM Procedure Total Return 1YParameter


Level of AUM N Mean Std Dev--- 3155 15.6629857 14.2514006High 4 31.4650000 13.9608464Low 22 15.1572727 9.859138

`-----Total Return 1Y-----

Standard Deviation 1Y


GLM Procedure Standard Deviation 1YParameter


`-----Standard Deviation 1Y-----

Sharpe Ratio 1Y

Estimate Standard Error t Value `Pr > |t|AUM --- 1.67441 0.15657484 10.69 <.0001AUM High 2.205 4.38339655 0.50 0.615AUM Low 1.31455 1.86908657 0.70 0.4819

GLM Procedure Sharpe Ratio 1YParameter



`-----Sharpe Ratio 1Y-----

B. Hedge Funds

Total Return 1Y

Estimate Standard Error t Value `Pr > |t|AUM --- 8.71107 0.50167926 17.36 <.0001AUM High 10.4121 2.90658796 3.58 0.0003AUM Low 6.84392 1.51997984 4.5 <.0001

GLM Procedure Total Return 1YParameter


`-----Total Return 1Y-----

Standard Deviation 1Y


GLM Procedure Standard Deviation 1YParameter



`-----Standard Deviation 1Y-----

Sharpe Ratio 1Y

Estimate Standard Error t Value `Pr > |t|AUM --- 1.36064 0.36928070 3.68 0.0002AUM High 1.13742 2.14171231 0.53 0.5954AUM Low 1.18786 1.11616902 1.06 0.2827

GLM Procedure Sharpe Ratio 1YParameter


`-----Sharpe Ratio 1Y-----

R-Squared 1Y

Estimate Standard Error t Value `Pr > |t|AUM --- 18.4516 17.4461356 1.06 0.2912AUM High 0.25250 137.0937718 0.00 0.9985AUM Low 0.12261 57.1720550 0.00 0.9983

GLM Procedure R-Squared 1YParameter


`-----R-Squared 1Y-----


THE RELATIONSHIP BETWEEN SOCIOECONOMIC STATUS AND EMOTIONAL GRATIFICATION FOR CONSUMERS WHO

PURCHASE OVERTLY BRANDED (OVERTLY DESIGNER) GOODS

Sarah Siracusa

Abstract

When examining the reasoning behind a consumer’s choice of luxury purchase, we rely largely on consumer psychology. One important psychological factor is the concept of needs. Consumers of different socioeconomic backgrounds have different needs, thus influencing what they choose to purchase. While past research has focused on intrinsic and extrinsic aspirations, and the relationship between aspiration and luxury brand preference in predicting luxury consumption, there has not yet been a study conducted focusing on the relationship between socioeconomic status and emotional gratification of purchasing overtly branded (overtly designer) goods in America. After surveying participants in three socioeconomic income groups, it was found that people in the upper income group displayed significantly more positive emotions when purchasing aspirational designer goods.


Introduction

When examining the reasoning behind a consumer’s choice of luxury purchase, we rely largely on consumer psychology. One important psychological factor is the concept of needs. Consumers of different socioeconomic backgrounds have different needs, thus influencing what they choose to purchase. While past research has focused on intrinsic and extrinsic aspirations, and the relationship between aspiration and luxury brand preference in predicting luxury consumption, there has not yet been a study conducted focusing on the relationship between socioeconomic status, psychogenic need, and the consumer’s personal definition of aspiration in purchasing overtly branded (overtly designer) goods in America. In previous studies, R.M. Ryan and E.L. Deci (2000) have defined aspiration in the context of the Self-Determination Theory, as a macro theory of human motivation concerned with the development and functioning personality within social contexts, asserting that humans are active organisms with a natural tendency toward psychological growth and development (Sheldon 2004). This growth process is nourished and maintained by the satisfaction of basic psychological needs, which are innate, universal, and essential to well-being. The achievement of the state of well-being is therefore dependent upon an individual’s ability to satisfy his or her needs. Aspirations are thought to influence motivation and, in turn, behavior (Kasser and Ryan 1996). Therefore, according to a study by Dholakia and Talukdar (2004), aspirational consumers have a tendency to imitate the buying behavior of reference groups to which they would like to belong. The growth of the aspirational luxury consumption market especially has developed to include members of the richest social classes, as well as those at a more modest socioeconomic level (Nueno and Quelch 1998; Yeoman and McMahon-Beattie 2006). This study seeks to examine personal and socioeconomic status in defining aspiration and the relationship between consumers and aspirational goods.



A. Luxury Consumption Market

Studies of the motivations for luxury consumption fall into two broad categories: personal orientation and social orientation. Personally orientated purchase of luxury goods is internally driven and reflects self-fulfillment goals (Tsai 2005). Tsai was one of the first researchers to propose and test a model to assess customers’ intention to re-purchase luxury brands on the basis of personally orientated goals. He found that socially orientated purchasing behavior is externally driven, reflecting a desire to impress others. A similar study was popularized by Michael Silverstein and Neil Fiske in their book Trading Up and their Harvard Business Review article “Luxury for the Masses,” where they coined the term “masstige.” According to Silverstein and Fiske, America’s middle-market consumers are trading up. They are willing and eager to pay a premium price for goods that are called New Luxury—products and services that possess higher levels of quality, taste, and aspiration than other goods in the category, but are not so expensive as to be out of reach (Fiske and Silverstein 2004). These products are called “masstige products” and are prestige products available to the masses. This new emerging market segment was growing, prior to the Great Recession of 2008, at the expense of the premium segment in several product categories. Retail has seen a lot of activity in the masstige space, with new brands and new store concepts such as Sephora, and Bath and Body Works. Additionally, this trend has spread to consumer manufacturers of such products as skin and hair care, where Olay and TRESemmé positioned themselves directly against the premium segment, openly questioning the need to pay extra. There are many more successes: Coach persuaded women to buy $300 handbags when a $40 version from a value chain could have sufficed; and Williams-Sonoma trained shoppers to covet a $50 stainless-steel hand-crank can opener, even though Walmart sells a high-quality electric model for less than half the price. The Fiske and Silverstein research, however, shows that while consumers are willing to pay more in some categories (trading up) to achieve better value, they are paying less (trading down) in other categories. They found that “almost every American engages in this


practice of ‘rocketing,’ spending a disproportionate amount of one's income in a category of great meaning. The combination of trading up and trading down leads to a ‘disharmony of consumption,’ meaning that a consumer’s buying habits do not always conform to the income level” (Fiske and Silverstein 2004). Fiske and Silverstein define three major types of New Luxury goods: Accessible Super-Premium products, Old Luxury brand extensions, and Masstige goods. Accessible Super-Premium products are relatively low-priced goods that sell at the top of their category (Belvedere vodka is given as an example). Old Luxury brand extensions are lower-priced versions of extremely high-priced products (the $26,000 Mercedes is provided as an example). Masstige brands are priced well below the extremely high-priced Old Luxury brands, but above conventional products in their category (examples cited previously). New Luxury goods fall between the Old Luxury products purchased for status, class, and exclusivity, and the traditional middle-market goods that are bought based on price, functionality, and convenience. According to Fiske and Silverstein, New Luxury products “must have technical differences in design or technology or both … must contribute to superior functional performance … and must engage the consumer emotionally” (Fiske and Silverstein 2004).

B. Measuring Emotions and Psychogenic Needs

Engaging a consumer’s emotion is the crux of this study. Emotions play a very important role in the span of consumers’ lives. The relationship with the physical world is emotional, and, therefore, emotions evoked by products enhance the pleasure of buying, owning, and using them (Hirschman and Holbrook 1982). In purchasing decisions, emotional responses may be a determining factor in the choice of what is bought. Mehrabian’s (1995) Pleasure, Arousal, Dominance (PAD) Emotion Scales has been previously used as a highly useful and convenient assessment of consumer emotional reactions to services, products, or combinations of products and services. A similar method of measurement can be extracted from Henry Murray’s Psychogenic Needs.


C. Psychogenic Needs

Henry Murray developed the Thematic Apperception Test (TAT), which is a personality test designed to determine personality themes as well as unconscious motivation. He focused on basic needs in personality, which he called psychogenic needs, as he believed these needs were largely at the unconscious level. He narrowed these needs down to 27, which have stood up to research; however, the three needs and forces which have been the focus of much study are the need for power, the need for affiliation, and the need for achievement. The need for power refers to the desire or need to impact other people, to control or be in a position of influence. The need for affiliation has a long history of research, and studies show that those with a high affiliation-measure often have a larger social circle. They spend more time interacting with others, such as talking on the phone and writing letters, and they are more likely to be members of social groups or clubs. Those with a high need for achievement demonstrate a consistent concern about meeting obligations and accomplishing tasks. They are, however, more focused on internal motivation rather than external rewards. For example, those that measure high in achievement are more likely to value intelligence and personal achievement over recognition and praise. Culture and gender have been shown to influence these needs. For example, the United States rates higher on the need for achievement than many other countries whose focus is more on relationships and the need for affiliation. Men and women also demonstrate their needs in different manners. Men with a high need for power tend to be more risk-takers and act out more readily, while women tend to be more involved in volunteer activities. Combined with other personality traits, such as introversion or extroversion, the needs may also show themselves in very different manners. Introverts may demonstrate their high need for affiliation through small groups and intellectual pursuits, while extroverts may evidence this same need through large gatherings and loud parties. However they are expressed, these three needs have shown a consistent pattern in research, perhaps an even stronger pattern in humanistic theory than in trait theory itself.


D. Social Class in America

A large middle class is not a naturally occurring phenomenon. It is the hard-won result of persistent individual effort and social ingenuity (Whitehead, 2011). As it emerged in Anglo-American societies, middle-class life was precarious and insecure. People in the middling ranks engaged in risk-taking and speculative activities, and they faced a constant threat of bankruptcy, debtors’ prison and social disgrace. Thus, the history of the expansion of the middle class has been a constant struggle to secure more people against the perils of a risk-taking way of life. This struggle was the impetus for the propagation of bourgeois values like thrift, sobriety, deferred gratification, self-control, financial discipline, time management, and quest for learning. It was the impetus for the formation of voluntary and cooperative institutions like credit unions, trade unions, lending libraries, reform societies, civic clubs, and religious organizations (Whitehead 2011). Only after many years of economic and social change were American households able to secure a middle-class life with the ability to earn a living through stable, steady and productive work, and to save and to build assets for future goals and for giving to others. According to The New York Times’ “Class Matters” series and the U.S. Census Bureau statistics from 2000 and 2003, the typical American who makes $25,000 per year is identified as lower class. Accordingly, the American who makes between $25,000 and $70,000 is grouped as being middle class, and the American who makes more than $70,000 per year is identified as upper class (Winfrey 2006). Robert Reich, former Secretary of Labor for the Clinton administration, is an expert on social policy and class in America. In an interview with Oprah Winfrey, he said that a family’s ability to provide their children with a quality education, health care and access to other resources determines one’s class. Though Reich calls the rags-to-riches story “a very important part of the American creed,” he says the middle class is actually shrinking. He compares the range of incomes and classes in America to a ladder—one that is getting longer and longer. He said that even though people are working harder than they ever have in their lives, they are not able to climb the ladder because the middle rungs are not there any more. It is harder to reach a higher income class. According to Reich, most people end up in the same class as their parents. “We live in a society in which the most important predictor in where you’re going to end up—in terms of class and also wealth—is your parents’ class and their wealth" (Winfrey 2006).


Through his documentary films, Jamie Johnson brings viewers inside the culture of super high-income families in America and documents how they think, act, and spend their money. As an heir to the Johnson & Johnson pharmaceutical fortune, Johnson has access to this exclusive world that 99 percent of Americans never experience firsthand.

His first film, Born Rich, exposed how 10 children from wealthy families spent their time and their money. In addition to exposing the culture of super-rich families, in his new documentary, The One Percent, Jamie also discusses what life is like on the other end of the economic spectrum. His film explains the widening gap between haves and have-nots in America. According to The One Percent, since 1979, the top one percent of Americans own approximately 40 percent of the country’s wealth; the top one percent possess more wealth than the bottom 90 percent combined, and an average member of the top one percent earns approximately $862,000 a year, while a majority of Americans earn only $34,736 (Winfrey 2006). According to Jamie Johnson, the widening wealth gap and rising inequality could be an ominous sign for the economy and for our civilization. Robert Reich agrees. He stated on the April 21, 2006 Oprah Winfrey Show that “societies are fragile things; they're based on trust. … If people don't feel that they have a fair chance of getting ahead … a lot of people feel excluded. That’s not good for society. That doesn’t keep America together" (Winfrey 2006). E. Bottom of the Pyramid

Socioeconomic status directly affects consumer behavior. Previous studies have examined different levels of the socioeconomic status, specifically the “bottom of the pyramid.” Since the 1960s, several authors have noted that the poor pay more for the same products than rich people. However, little attention was paid to their buying processes until relatively recently. It was only since 1998 that the bottom of the pyramid has been considered an important market that could be targeted with profit by companies. Van Kempen, in a field experiment, found that “a substantial proportion of the urban poor in developing countries is willing to pay for a designer label as a symbol,” claiming that the main reasons for this are that “designer labels are a symbol of status and integration in society. As they buy a branded product, poor people feel as if they belong to the society and are not excluded. Also, it is seen as a kind of differentiation from extremely poor people who cannot afford these products” (Barki and Parente 2010).


No one doubts the importance of price for a consumer with a limited budget. However, besides the many studies already mentioned concerning consumers’ mobility limitations, new studies demonstrate that sometimes price is not the main driver for the poor’s store patronage. There are segments of the low-income populations that are not driven by prices (D’Andrea and Lunardini 2005). According to Aguiar (2008), one major difference between communicating to the bottom of the pyramid and to more upscale consumers is the method of dealing with aspiration levels. While the products and service messages directed to the upper class stress the idea of “exclusivity” and differentiation from the “middle-class masses,” the messages to the low-income classes highlight the idea of “inclusivity,” which suggests to them access to a “middle-class standard of living.” The findings of the “Bottom of the Pyramid,” an exploratory qualitative study of low-income consumers and business executives serving Brazilian low-income markets, indicated that members of the lower income group demonstrate a high concern about maintaining their self-respect and being treated with dignity (Barki and Parente 2010). Although shopping can be viewed as a social process in any economic class, it is striking that the study finds that the self-realization feeling of an upper-class woman’s shopping experience in an elegant shopping center may find its equivalent with a low-income woman’s shopping experience in a supermarket. Despite the richness of the discoveries in the study, its findings are restricted to the population analyzed and warrant future exploration.

II. Hypotheses

Because socioeconomic class and emotional states have all been found to impact the purchase of aspirational luxuries, the objective of this study is to determine the relationship between socioeconomic status and emotional gratification for consumers who purchase overtly branded (overtly designer) goods. Therefore, the first hypothesis should be:

H1: Purchasing aspirational goods will result in different emotions for low- vs. high-income consumers.

H1a: Low-income consumers gain a sense of belonging or inclusivity by purchasing aspirational products.


H1b. High-income consumers gain a sense of exclusivity after purchasing aspirational products.

Since aspiration has already been defined, it is necessary to examine the differences in aspiration between socioeconomic groups. These hypotheses will be analyzed with the study of Brazilian bottom-of-the-pyramid consumers in mind, and reviewed from the standpoint of American consumption.

H2: Purchasing aspirational goods will result in positive emotional states among consumers.

H2a: Purchasing aspirational goods will result in pleasure.

H2b: Purchasing aspirational goods will result in arousal.

H2c: Purchasing aspirational goods will result in dominance.

Mehrabian and Russel’s PAD Emotion Scales plays a large part in determining the intrinsic motivations behind aspirational consumption. By measuring the states of pleasure, arousal, and dominance in the purchasing behavior of consumers of different socioeconomic backgrounds, it can be determined whether the purchase of an overtly designer good would result in positive or negative emotions.

H3. The advertising of overtly branded (designer) labels will result in greater aspirational impact on consumers than will the advertising of mass-branded labels.

It is predicted that overly branded (designer) labels will have a greater and more positive impact on those consumers who purchase them than any other mass-market brand would. Within the context of this study, an overtly branded good will be tested against a mass-market good, and against the emotions of the consumers, to determine the impact of the goods on consumers’ purchasing behavior and attitude.


III. Methodology

In order to determine the relationship between socioeconomic status, psychogenic needs, and the personal definition of aspiration for consumers who purchase overtly branded (overtly designer) goods, experimentation will occur via survey to a random sample of participants. All the data for this paper will be primary research. A questionnaire was established and data was collected online from a panel obtained through Qualtrics Research Company. Qualtrics provided a three-strata stratified sample of participants based on household income, with breaks in the strata at $20,000 and $70,000, with equal proportions from each stratum. Panel members were at least 18 years old. The questionnaire was run through Qualtrics, which distributed the survey to the three-strata sample of participants, in addition to displaying two different advertisements displaying a man and woman modeling quality jeans. The two advertisements differed only in the fact that one displayed denim jeans with a fictitious mass-market brand name, and the other displayed the denim with a fictitious designer name. The survey participants were assigned to two different treatment groups. Half of the participants of the three-strata sample were shown the advertisement with the fictitious mass-market brand name, and the other half were shown the advertisement with the fictitious designer name. Questions followed the review of the advertisements, with participants being asked about the quality of the advertisements. Participants also were asked how purchasing and wearing the jeans pictured would make them feel, and how they personally internalize their desire to purchase the goods. Additionally, questions were asked about the participants’ social class and demographic profiles. The responses were compared to respondents’ socioeconomic statuses in order to tease out how aspirational goals differed according to their psychogenic needs of affiliation, achievement, and power. The survey rendered 115 responses, with participants ranging in age from 18 to 94.

IV. Results and Data Analysis

After the surveys were collected, the data was examined for completion and for frequency. According to the analysis, 45 participants were from the lower-income level, earning $30,000 or less a year; 29 were


from the middle-income group, with an annual income between $30,000 and $70,000; and 41 participants were from the upper-income grouping, with an annual income of $70,000 or more. Additionally, of the participants, 46 (40%) were male, and 69 (60%) were female. Of the responses collected, 115 were valid for all questions of the survey; 56 participants viewed the first advertisement (Old West), while the 57 viewed the second advertisement (Giuseppe Brunetti). After running manipulation checks to see whether the participants viewed the advertisements as professional, realistic, and of high quality, it was concluded that both sets of participants felt that the advertisements were realistic, professional, and of high quality. Additionally, survey participants were asked to name the number of jeans they own and the price they typically pay for a pair of jeans. Their responses were studied according to the different income groups. As is shown in Figure 1, those who identify as part of the higher income group have a higher number of jeans than do those who identify with the lower- or middle-income groups. This trend was even more evident when comparing the price of jeans to income (Figure 2), where a large number of participants identified with the lower-income group bought jeans that were lower in price than did those of higher income, who were shown to buy jeans that were more expensive.

FIGURE 1


FIGURE 2

Univariate and Multivariate ANOVA tests were conducted to test the validity of all three hypotheses previously outlined. In examining the PAD Emotion Scale questions and the questions about aspiration, a noticeable trend began to emerge. For all but two of the aspirational questions asked, the results were statistically significant and displayed very strong results for the upper-income group. When asked, after viewing either of the advertisements, whether purchasing the jeans was important to the participant, the upper-income group responded with a greater certainty (0.001) than did the middle- or lower-income groups. The upper-income group also had a greater estimated marginal mean than the lower- and middle-income groups. Additionally, when examining the responses to questions such as whether purchasing the jeans would set the participant apart from the crowd, whether purchasing the jeans would make them feel powerful, what fashionable people would think of the jeans, whether purchasing the jeans would make the participants feel respected by others, whether purchasing the jeans would give the participants a sense of self-fulfillment, and whether purchasing the jeans would give them a feeling of


excitement, a sense of security, and increase their self-respect—the same results, of high statistical significance and a higher estimated marginal mean for the upper-income group, were witnessed. After conducting a univariate ANOVA with multiple comparisons between income and the advertisement shown, it can be concluded based on statistical significance that the version of the advertisement shown to the participant had no effect on how they answered the previously mentioned questions about aspirations and the PAD emotions. When the two advertisements were graphed with each other according to each question asked, they produced identical results, leading to the conclusion that the type of advertisement shown had no effect on how the participants viewed luxury consumption or their personal aspirations and emotions when purchasing the jeans.

V. Conclusion

In support of H1, the ANOVA tests specifically confirm H1b, where high-income consumers gain a sense of exclusivity from purchasing aspirational products. Based on the statistical significance and the graphs of the consumers’ aspirational reactions to the jeans, the emotions displayed by the higher-income participants were much stronger than those displayed by the lower- or middle-income groups. H1b, therefore, was confirmed that high-income consumers displayed more feelings of exclusivity, as they showed more powerful preferences to separate themselves from the middle and lower classes. It can also be concluded that, according to H1a, low-income consumers also gain a sense of belonging and inclusiveness from purchasing aspirational goods. Those consumers’ positive feelings and emotions, however, were not as strong or statistically significant as were those of the high-income group. In addition to this finding, H2, where the “purchasing of aspirational goods will result in positive emotional states among consumers,” specifically pleasure (H2a), arousal (H2b), and dominance (H2c), the comparisons of the 18 emotional states tested in the wearing and purchasing of the jeans advertised again displayed that participants who identified themselves as part of the upper-income group were statistically more significant than those who identified with the middle- and lower-class income levels. Those in the higher-income group also displayed more positive emotions on all accounts, of pleasure, arousal, and dominance. As previously mentioned, no significant interaction between the advertisement shown


and the income level was found, and therefore H3, “overtly branded (designer) labels will result in greater aspirational impact of advertised products than will mass-branded labels,” was not found to be true. The study showed very distinct and significant differences between the upper-income group and the middle- and lower-income groups together. This leads to the belief that the upper-income class is purchasing to be exclusive. As mentioned in the review of previous research in the field, this study displays the widening of the middle class and how those of lower-income levels are purchasing to identify with the middle class. The middle class, however, does not significantly purchase products to identify with the upper-income class. In this study, income was the sole indicative factor in determining consumers’ responses to purchasing and wanting to purchase jeans and other aspirational goods. Additionally, when data was controlled for the advertisement, the effect of income became more significant. This study is important to marketers, as democratization of brands is strongly associated with higher market share and margins. It drives value and makes brands more resilient. Plotting a brand in the continuum of masstige hierarchies can reveal new insights on how to optimize brand value and strengthen pricing strategies. If marketers were to use the results of this study, they could use the insight of the particular motivations and definitions of aspirational products to consumers as a way of promoting and advertising their products more accurately to those of particular socioeconomic classes.

VI. Limitations

Despite the conclusiveness of the study in determining the purchasing behavior and emotions of different socioeconomic groups in aspirational shopping and overtly branded goods, the study was limited to the advertisements shown to the participants. The jeans themselves were not overtly branded—only the advertisement—which may have affected the participants’ responses to what they saw and how they chose to purchase. The reason the jeans were chosen for the advertisement was to not introduce any biases the participants may have had to the survey; a different study, however, with a more recognizable or overtly branded product may have proven more effective, especially in proving H3, about the impact of advertising on aspirational purchases. Another limitation encountered was that the consumer was asked


to imagine purchasing the jeans and was not able to interact with the product. This may have affected the accuracy of the results, as it may have been more effective if the consumers were not asked to introduce imagination into the study. Additionally, the advertisements used in the study used fake designer and mass-market names, again to avoid introducing any bias into the survey. This may have affected the accuracy of the results, as the participants may not have been able to accurately discern which advertisement was mass-market and which was designer, as neither was specifically identified, nor was the retail outlet for the jeans.

VII. Suggestions for Additional Research

Within the bounds of the research for this study, only two different treatments for the participants were tested in determining the relationship between socioeconomic status and emotional gratification for consumers who purchase overtly branded goods. In studying the relationship between income, aspirational purchasing, and branding effectiveness in advertisements, however, the research could be narrowed down to whether particular retail outlets affect the relationship between consumers and their purchasing behaviors. This study could therefore be completed using four treatment groups of participants, where the first would be shown the advertisement for the jeans with a fake designer name and have the opportunity to purchase the jeans at an upscale store. The next group would see the advertisement featuring, once again, jeans with a fake designer name; these jeans, however, would be available for purchase at a mass merchandiser. The third group would be shown the advertisement with the man and the woman modeling an upscale pair of jeans; the jeans, however, would be advertised as a mass-market brand available at an upscale store. Finally, the last group would be showed the advertisements where the models would be wearing mass-market, brand-name jeans, and these jeans would be available to the mass merchandiser. Just from this study alone, different branches of analysis can be used for future research. The information gathered on the price points of the jeans, broken up by socioeconomic status, or the number of jeans consumers of different socioeconomic statuses purchased, could be the basis of a study and analysis to determine the emotions and behaviors of


consumers who purchase overtly designer goods. Different overtly designer goods could be examined, such as those that are purposely branded to be recognizable. The eventual findings of the study of extremely overtly designer goods could lead to different results, based on the overall attitude and biases the consumer exhibits toward the good. Additionally, since the study examines the effect of socioeconomic status on purchasing behaviors and the emotions of consumers of overtly designer goods, an important aspect that could be further examined is the effect of the 2008 economic crisis on overall income in the country. It would be interesting to learn how purchasing behaviors, along with the emotions of consumers in different socioeconomic classes, shifted with the change in the economy, and how consumers have been impacted since 2008.

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ABSTRACTS OF PREVIOUS STUDENT RESEARCH PAPERS

GABELLI SCHOOL OF BUSINESS HONORS PROGRAM

OSCARNOMICS: EVALUATING THE ECONOMIC WORTH OF THE ACADEMY AWARDS

Jake Braithwaite, Max Honerkamp, Jim Sheilds, and Jillian Switzer

Class of 2011

This investigation addresses limitations associated with previous research to determine empirically the value of winning or being nominated for a Best Picture Academy Award on a film’s weekly box office grosses. In addition, this study delves into yet unstudied territory by measuring how an Academy Award affects the careers of actors and actresses nominated for or awarded the Best Actor and Actress trophies for the first time. Overall, results suggest that both nominations and wins in the Best Picture category increase weekly box office grosses following their respective announcements. Unexpectedly, findings indicate that Academy Award nominations and wins tend not to presage an increase in a winner’s or nominee’s future film grosses. Economic implications for the film industry are discussed. Future research directions are proposed.

THE MICHAEL VICK DOGFIGHTING CASE: A CULTURAL LITMUS TEST FOR THE DECISION-MAKING OF ADVOCACY GROUPS Solange E. Badamo, Steven J. Burgermeister, Sidney Henne, and Sean T. Murphy Class of 2011 In this thesis, we examine how a wide range of animal advocacy groups react in the quasi-experimental setting of the Michael Vick dogfighting case. Using rich interview content, we explore three research questions: When a critical event occurs in the animal advocacy realm, what motivates


advocacy groups to respond, what determines the extent of their response, and what implications do these actions have on the issue? A key finding is that the stigmatizing nature of a high-profile opportunity motivates the advocacy group to action. This action is constrained by that group’s scope and legitimacy. We investigate specific interactions in order to understand the overall effects on key stakeholders affected by the issue. The objectives of these interactions vary by stakeholder. The key long-lasting objective of advocacy groups is to improve the welfare of animals by increasing public awareness, which in turn legitimizes the cause for which these advocacy groups are fighting.

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BRIC IPOs: HOW DO CAPITAL MARKET AND ECONOMIC ACTIVITIES IN EMERGING MARKETS RELATE? Robert Gu and Hoi Yeung Luk Class of 2011 Since the beginning of the millennium, the acronym BRIC (Brazil, Russia, India, and China) has captivated the world with an extraordinary economic growth story that has defined the first decade of the 21st century. Along with the newfound prosperity, entrepreneurs in the BRIC countries have been waiting to open themselves for further opportunities for investors all over the world through the method of equity financing by issuing IPOs. This paper primarily attempts to explore the relationship between the capital market activities of the BRIC countries and their corresponding economic indicators. Since the millennium, IPO activity has witnessed a rapid increase alongside with BRIC’s magnificent growth. The hypotheses of the research are supported by theories such as aggregate money demand, IPO incentives, and the investment process of emerging market companies. The subjects concerned are the total number of IPO issuances and the total monetary value of the issuances within the first decade of the millennium for all of the BRIC countries. Through conducting multilinear regressions of data collected from the SDC platinum database and the World Bank, the paper has suggested that BRIC IPO deal numbers are highly contingent upon the different factors of the economies with significant levels of relationships, and that the total deal proceeds in any given year for BRIC are only contingent to overall GDP and slightly to the overall size of the equity markets of BRIC measured by market capitalization. _____________________________________________________


UNDERSTANDING THE FORMATION OF UNDERWRITING SYNDICATES IN EMERGING NATIONS

John Keany and Daniel Sawyer

The process of new startup firms raising capital through equity markets and going public is a strong sign of financial growth and innovation. Going public for the first time requires the issuing firm to share information with potential investors and requires financial institutions to underwrite the effort, typically through a syndicate. The underwriting syndicate is a coalition of competing banks that serve as intermediaries between the firm and the investors. In emerging nations, this process is compounded by the differences in the maturity of the financial markets and the economic environment. The growth and significance of capital markets in the BRIC (Brazil, Russia, India, and China) nations offer a good laboratory to understand the formation of underwriting syndicates and their role as intermediaries in bridging the gap between savers and investors in asymmetric information settings. We empirically analyze the formation and development of the underwriting syndicate in BRIC nations, focusing on the size and nature of the underwriting syndicate focusing on changes and trends and how these relate to equity market growth. We examine the role of underwriter reputation, underwriter networks, and local/international underwriters as these attributes reflect the ability of the underwriter to reduce asymmetric information. We find that the probability that a bank is chosen to be a part of the syndicate is positively correlated to its reputation and ability to network, and is higher if it is a local bank. The size of underwriter syndicates decreases over time and is positively related to the size of the deal. We conclude that the ability to produce information and promote this ability to outside parties is critical, especially in emerging markets, where information asymmetries are generally greater.

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PROJECT 1012: GENTRIFICATION IN AMSTERDAM’S RED-LIGHT DISTRICT Benjamin Garstka Class of 2011 This paper seeks to examine an instance of gentrification in the context of the creative city. Definitions of gentrification and how it is related to cognitive-cultural economies is first discussed. The author then highlights the link between production-driven gentrification, the idea of the creative class, and the effects of societal differences on how gentrification actually occurs at the neighborhood level. The city of Amsterdam’s Red Light District and its urban restructuring plan Project 1012 are used as a case study. The paper then examines the effects of Project 1012 on the local housing market, ethnic composition of the district, tourism, and social developments in the neighborhood. The paper concludes by discussing how neo-liberal attitudes in Dutch society have transformed the idea of gentrification into a developmental strategy by emphasizing the creative industries in place of criminogenic businesses.

AN EXAMINATION OF PERSONAL PRONOUN USAGE IN BRAND NAMES Nicole Palermo Class of 2011 This study investigates how and under what conditions the personal pronouns “I” and “my” influence brand attitudes. Prior research on ownership and narrative self-referencing was employed to predict the effects of “I” and “my” on brand attitudes. It was hypothesized that my-noun word pairings would evoke greater feelings of ownership and more favorable brand attitudes than my-verb composite brand names. Similarly, I-verb pairings were expected to foster higher levels of narrative self-referencing and more favorable brand attitudes than I-noun structures. Furthermore, ownership was expected to mediate the influence of “my” on


brand attitudes, and narrative self-referencing would mediate the influence of “I” on brand attitudes. The results of an experiment with a nationally representative sample of U.S. consumers supported the predictions that my-noun brand names yielded higher levels of ownership and enhanced brand attitudes, and that I-verb compositions evoked greater feelings of narrative self-referencing and more favorable brand attitudes. Narrative self-referencing was found to completely mediate the effect of “I” on brand attitudes, while ownership was found to partially mediate the effect of “my” on brand attitudes.

SUSTAINABILITY MARKETING: EFFECTS ON PRODUCT EVALUATION FROM CONSUMER ATTITUDE INFLUENCES Stephanie Yu

Class of 2011 Evaluating the relationship between sustainability marketing and consumer behavior is a field of study that has yielded different and sparse results. The primary purpose of this research is to test the impact of differences of perceived low/high warmth dimension on sustainable product evaluations. The secondary focus of this study is to test how consumers evaluate the attractiveness of a sustainable good when they are of low/high collectivist orientation or low/high materialistic orientation. This research will focus on consumer evaluations of sustainably produced wine as a product of reference that is perceived as either characteristically low/high in warmth. Therefore, the objective of the research is to determine effects of differences in perceived warmth on sustainable product evaluations, and also see if collectivist/materialist orientations affect consumer evaluations of a product’s attractiveness. ____________________________________________________________


THE EFFECT OF TAXES ON THE CHINESE CAPITAL MARKETS Tiantian Wan

Class of 2011 On December 31, 2009, China changed the tax treatment of restricted stock, effective January 1, 2010. The gain on transfer of founders’ restricted stock of publicly listed companies is now taxed at 20%, whereas such sales were subject to no income tax before the change in law. The purpose of this research is to investigate the change of the Chinese capital market after the new tax treatment went into effect. The research examines whether firms’ stock price changes are positively related with the amount of restricted stocks that a firm has outstanding. Furthermore, this research takes into account time in regard to the remaining lock-up period to see whether firms that have a longer lock-up period experienced a high stock return compared to firms that have a shorter lock-up period.

AN EMPIRICAL STUDY OF THE STOCK MARKET EFFECT OF AUDITOR SWITCH DECISIONS ON ARTHUR ANDERSEN CLIENTS IN 2002 Cathyrn Bennett Class of 2010

The purpose of this research is to investigate auditor-switch decisions precipitated by the Arthur Andersen meltdown in 2002. The research examines whether Arthur Andersen’s audit clients experienced a significant market reaction (abnormal returns) when they announced their decision to replace Arthur Andersen as its auditor. Furthermore, this research will take into account the variable of time in regard to the announcement dates of companies to replace Arthur Andersen to see whether companies that decided to switch earlier experienced a different market reaction compared to companies that replaced Arthur Andersen later.


REIT PRICING RELATIVE TO NAV: THE LEVERAGE FACTOR; EVIDENCE FROM THE ECONOMIC CRISIS Daniel Carr

Class of 2010 This research looks at a significant sample of United States equity Real Estate Investment Trusts (REIT) from 2002 to 2010. The research attempts to identify the relationship between changes in Net Asset Value (NAV), changes in Holding Period Return, and firm level leverage. Correlational testing is the main tool used to accomplish this examination. Findings show that a significant relationship between change in return and change in NAV existed only after 2007, when debt was not taken into account. When debt was taken into account, a correlation was seen earlier. The “office” property sector displayed similar results with a significant correlation being recognized only from the end of 2006 on.

BANK LENDING NEWS DURING BUBBLES: RECENT EVIDENCE Ian D. Taylor

Class of 2010 Virtually all publicly traded firms borrow from banks. However, despite this commonality, the reporting of bank loan agreements in the financial press is associated with a positive share price reaction. In order to address this phenomenon, the frequency and determinants of bank loan reporting are examined. Overall, the results show that loan reporting frequency increased during the 2004 to 2007 banking bubble. However, reported loans and their borrowers are still riskier than non-reported ones, which suggests that loan news during the most recent bubble are still noteworthy and informative about the potential of the borrowers.


DEFINING AND REGULATING INFORMATION PRIVACY: THE LEGAL AND ETHICAL RAMIFICATIONS IN THE AMERICAN WORKPLACE Michael Keute Class of 2010 There is currently an ongoing debate with regard to information privacy between American employers vs. American employees and American law vs. international law. Through much intense research and study, the thesis herein focuses on solving each of these aforementioned disputes. Throughout American history, there have been numerous debates and significant deliberation regarding the controversial issue of the right to privacy and the extent to which it should be regulated. However, one important aspect of privacy that has been continuously neglected is the right to information privacy in the workplace. In order to effectively consider a proper regulatory method regarding this type of privacy, there first must be a proper definition of information privacy. Only after one has been created can a proper method of regulation be considered. This thesis will begin with the creation of such a definition and continue by proposing necessary regulation methods regarding the scope of information privacy in the workplace. It will be demonstrated that corporations are gathering personal information about both their prospective as well as their current employees (most of which happens without employees’ knowledge or consent), and that this practice proves to be unethical and immoral, and therefore, should be considered illegal. Regulatory methods for the protection of one’s information privacy in the workplace will be offered, as will the appropriate reasons why they must be implemented.

THE EFFECT OF XBRL ON THE TRADING VOLUME OF U.S. COMPANIES Scarlett Eva Lillian Sieber Class of 2010 Despite the proposed benefits of XBRL implementation, there exist few studies that empirically document its cost and benefits. The author examines all publicly traded firms on the Shenzhen Stock Exchange


during the 2003 to 2005 time period, with 2004 being the year of China’s mandatory adoption for external financial reporting, as well as 21 companies on the New York Stock Exchange during the 2004 to 2008 time period. The author finds that trading volume around the three-day window of financial statement filing is slightly larger (minuscule enough to have no impact) in the post-XBRL period for U.S. companies; the trading volume around the three-day window of financial statement filing is relatively smaller in the post-XBRL period for the Chinese companies; and that the XBRL filings have a larger impact on U.S. companies than that of their Chinese counterparts. This suggests that XBRL may not fully facilitate the dissemination of financial statement information and improve its usefulness to market participants.

INVESTMENT SUB-STYLES BASED ON INDIVIDUAL HEDGE FUNDS’ INVESTMENT STRATEGY RISK PREMIUMS Erin Perkins Class of 2009

The objective of this research is to identify hedge fund investment sub-styles within each major investment style based on idiosyncratic risks of each investment style. These styles include: convertible arbitrage, equity non-hedge, long/short equity, and fund of funds. The results of this research are compared to the results of both Mackey and Poole (2008), who studied the sub-styles of hedge funds based on systematic risks only, and Bourgois and Hing (2008), who studied the correlation of idiosyncratic risks to convertible arbitrage. This research proves that convertible arbitrage funds, equity non-hedge funds, and long/short equity funds have exposure to interest rate, equity, volatility, and credit risk, while fund of funds only has exposure to interest rate and equity risk. The differences and similarities between this research and the 2008 research will aid investors in choosing the hedge funds they invest in, and may aid them in hedging themselves against the risks of their investment. Regression analysis was used to correlate hedge fund investment styles to idiosyncratic risks.


THE SARBANES-OXLEY ACT OF 2002: ITS IMPACT ON CPA VIOLATIONS

Steven DeGrand

Class of 2009 This study explores whether the passage of the Sarbanes-Oxley Act of 2002 has had any effect on the number or types of violations of the AICPA Code of Professional Conduct by practicing accountants. Data spanning from July 2000 to October 2008 was collected from The CPA Letter and categorized according to gender, residence, date of infraction, and type of infraction. A one-way ANOVA test was performed on the number of violations to determine whether the act has had an effect on the number of violations that have occurred since its enactment. A x2 for Goodness of Fit was performed on the data concerning the types of violations that occurred to determine whether the act has had any effect on what types of violations are occurring since its enactment. A series of x2

for Goodness of Fit analyses were also conducted to determine whether gender or place of residence was significant. The results demonstrated that the number of violations has since increased and that the proportion of violation types is significantly different after the enactment of Sarbanes-Oxley than it was before. Place of residence was found to be significant for violations of Rule 501-Substandard Professional Conduct, Rule 501-Criminal-Business Related Infractions, and Bylaw Section 7.4.6: Failure to Comply/Respond; gender was found not to be significant.

AN INTEGRATED MODEL OF CONSUMER ACCEPTANCE OF SMS ADVERTISING

Brynn Moynihan

Class of 2008 This paper examines factors in determining consumer acceptance of SMS advertising via their mobile phones in both the United States and Turkey. The appeal of using the mobile phone as a marketing medium is its direct accessibility to consumers and its campaign accountability. The results of this study provide preliminary evidence that consumers’ attitudes do have


a significant positive relationship with intentions to opt-in to the new medium. The integrated model for this study is based on employing the theory of planned behavior, the theory of reasoned action, and the technology acceptance model to understand consumer acceptance of new technology, the diffusion of that technology, and its effect on behavioral intention to accept the innovation. This study identifies the potential for a new research domain in marketing and presents a conceptual framework for its examination.

THE EFFECT OF INDIVIDUALIST AND COLLECTIVIST CULTURAL ORIENTATION ON CONSUMERS’ LUXURY PRODUCT CONSUMPTION

Cristina Garcia

Class of 2008 This study attempts to determine the effect of individualist and collectivist cultural orientation on consumers’ luxury products consumption. Individualist cultures are defined by Hofstede as societies in which individuals look after themselves and their immediate families only. Collectivist cultures, on the other hand, are defined as societies in which individuals can expect others—such as relatives, friends, or any other in-group—to look after them in exchange for a trustworthy relationship. These cultural orientations have similarities with individual orientations, namely, social and personal orientation. Similar to collectivism, social orientation is someone’s tendency to act abiding by the social norms and expectations of the social network. In contrast to social orientation, personal orientation is someone’s tendency to act abiding by one’s personal integrity, desires, attitude, and emotions. Both cultural orientations and self-orientations have been studied extensively in different contexts. Never before, however, has the relationship between cultural orientation and luxury consumption been evaluated and tested. In this study, after viewing a print advertisement for a luxury cell phone, subjects were asked to evaluate a luxury product (luxury cell phone) according to hedonic and utilitarian dimensions. There were two versions


of the advertisement: one hedonic, stressing pleasurable factors; and one utilitarian, stressing functional factors. After performing careful analyses of variation between collectivism and the other variables (e.g., gift giving, social orientation, personal orientation) results found that culture did play a significant role in measuring the effect of consumers’ luxury consumption.

MASS CUSTOMIZATION AND THE FASHION INDUSTRY

Jillian Hastings Class of 2008 The fashion industry today is constantly changing, whether through technology or through the process consumers use to shop and purchase apparel. Technology is a growing field for fashion, especially for swimsuit manufacturing. Swimsuits are one of the hardest pieces of apparel to produce in sizes that will fit women well. Research has shown that mass customization is an effective and economic way to produce apparel and to give the consumer an overall better fit. This type of manufacturing is used in technologies such as body scanners, kiosks, and mirrors, which can virtually assist the consumer with fitting and selecting their garment. For the purpose of this thesis, swimwear consumption patterns and consumer behavior were the main focus in relation to the fashion industry. Research suggests that time, body type, social influences, perceived value/price, wealth of a consumer, the chain of consumption, and perceptual selection have an influence on purchases and consumer behavior. Out of n=122 participants, there were n=82 undergraduate students and n=40 graduate students, including faculty and staff members at Fordham University, who were asked to fill out a questionnaire. The questionnaire called for information on participants’ height, how they perceive their body type, the number of swimsuits they try on, the maximum amount of time spent shopping, the maximum amount of time they would be willing to wait for a customized suit, how they felt about using mass-customizing machines, their income levels, and how they felt about purchasing or paying more for a customized suit as opposed to a mass-produced suit. The results were

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conclusive and only two hypotheses were rejected. This topic of mass customization in the fashion industry has large potential for further exploration.

THE IMPACT OF DEBT POLICIES ON OUTSIDE DIRECTOR COMPENSATION AND INCENTIVES Josephine Simolacaj Class of 2008 This paper investigates whether leverage has an effect on outside director compensation and its components. The interest-alignment theory predicts that high-leverage firms pay more incentive-based compensation and higher total compensation, while the asset-substitution theory predicts the opposite. The OLS regression results show that leverage is negatively associated with total compensation. Moreover, leverage is positively related to cash retainer, stock-based compensation, and meeting fees, and is negatively related to option grants. This evidence supports the asset substitution problem, which suggests that firms that finance their assets with debt are more likely to be concerned with excessive risk-taking, and therefore pay less outside director compensation in the form of option grants.

THE CHANGING CORRELATION OF FISCAL AND CURRENT ACCOUNT BALANCES Amy Engel Class of 2007 This study examines the explanatory power of four variables on the twin-deficit hypothesis. The variables tested included fiscal balances, government expenditures, productivity growth, and price elasticity of


exports demanded. Data on the various measures was collected annually over a 12-year period, from 1993 to 2004, from a sample of 11 nations. The study employed a linear regression model to determine the explanatory power of the four variables. Furthermore, a stepwise test was performed on the variables found to be significant to determine the varying level of explanatory power of each variable. Additionally, a Pearson’s correlation was conducted to assess the correlation among variables. The results demonstrated that fiscal balances and price elasticity of exports have a significant, positive correlation on the current account balance, while changes in productivity have a significant, negative effect on the current account balance.

THE EFFECTIVENESS AND LEGITIMACY OF THE PRACTICE AND PROVISIONS OF EARNINGS STRIPPING Anthony R. Scinto Class of 2007 Due to increased global competition from economic globalization, multinational organizations have had to create ways in which to protect their earnings and grow their business. One such method has been the combined use of corporate inversion through corporate restructuring and earnings stripping through related-party debt agreements. Both of these techniques are generally seen in the United States as harmful to the American economy and labor market because they expatriate corporate earnings and labor. In response, the U.S. Congress has established rules governing the use of earnings stripping. The new rules are embodied in Title 26 of the United States Code, Section 163(j) and restrict the allowance of the interest deduction that is normally allowed a U.S. taxpayer for interest payments paid to a related party. This paper will explore the legislative history and congressional intent that precedes these new rules in an attempt to determine the effectiveness and legitimacy of Internal Revenue Code §163(j). If Internal Revenue Code §163(j) does not conform to previous tax history and its well-established standards and/or if Internal Revenue Code §163(j) is not an effective device to fix the problem that Congress wishes to address,


then the code section is lacking and should be revised or repealed. If Internal Revenue Code §163(j) does conform to previous tax history and the standards that have been established and/or if Internal Revenue Code §163(j) is an effective solution to the expatriation of American earnings and labor, then the code section should remain and be enforced.

IMMIGRATION AND ITS IMPACT ON THE UNEMPLOYMENT RATE OF NATIVE-BORN AGRICULTURAL WORKERS IN THE UNITED STATES Caitlin E. Leary Class of 2007 Since its founding, the United States has been a melting pot of different cultures, races, and ethnicities. The American demographic continues to change today as immigrants cross the U.S. borders to find work. This study focuses on immigration and its impact on native-born U.S. workers in the agricultural sector. Much of the debate on immigration focuses on whether or not immigrants are taking jobs away from Americans, or simply taking jobs that Americans do not want. According to neoclassical labor supply theory, as immigrants penetrate a labor force, the wages offered should decrease, sending people into unemployment. Using Iowa and California as testing states, and data from the Bureau of Labor Statistics, this study tests this theory. The results show that immigrant workers in the agricultural sector do not cause wages to decrease and native-born workers to be unemployed. Instead, in California, where the population is more than 25% foreign-born, the penetration of immigrants into the labor supply coincides with an increase in the wages in the agricultural sector.

DOES BRAND PERSONALITY DEPEND ON COUNTRY OF ORIGIN? Christine D’Angelo Class of 2007 This study attempts to determine the effect the country of origin of a


product has on the measurement of its brand personality. Brand personality, defined as the set of human characteristics associated with a brand, has recently been measured by the Aaker Brand Personality Scale, developed in 1997. Both the country-of-origin effect and brand personality had been studied extensively. Never before, however, had the relationship between the two concepts been evaluated. In this study, subjects were asked to evaluate a particular brand of digital cameras according to the 42-trait Aaker Brand Personality Scale after viewing a print advertisement for the camera. There were three different versions of the advertisement: one brand from Japan, one from America, and one from Russia. By performing analyses of variation among the brands and the Aaker scale measurements, results found that the product’s country of origin did play a significant role in measuring brand personality.

PERCEIVED CONSUMER EFFECTIVENESS AND ENVIRONMENTAL LOCUS OF CONTROL AS MODERATORS OF ENVIRONMENTALLY CONSCIOUS BEHAVIORS Laura Greenwood Class of 2007 Although it seems as if nearly everyone has positive attitudes regarding the environment, environmentally conscious behavior has not reflected those attitudes. To account for this discrepancy, this survey-based research will examine the moderating effects of specific attitudes such as Perceived Consumer Effectiveness (PCE), a belief about the extent to which an individual can contribute to a solution to the problem, and Environmental Locus of Control (ELOC), a belief about the extent to which an individual believes he or she has the ability to affect pro-environmental outcomes through his or her own actions, on the attitude-behavior relationship. Therefore, it was hypothesized that as levels of PCE and ELOC increase, the correlation between environmental attitudes and environmentally conscious behavior increases. Undergraduate business (n=59), graduate business (n=88), undergraduate liberal arts and sciences (n=50), and graduate social services (n=21) students at Fordham University completed a questionnaire measuring their participation in environmentally conscious behavior, degree of environmental concern, perceived consumer effectiveness, and environmental locus of control. The results show that


the more specific dispositional variables did not serve as moderating variables to the relationship between environmental attitudes and environmentally conscious behavior. Instead, the results show that they were direct predictors of behavior and were actually better predictors than general environmental attitudes.

MONITORING ELECTRONIC COMMUNICATIONS IN THE WORKPLACE Nikki Pappas Class of 2007 Considering the rapid growth of Internet and electronic mail use, current U.S. law does not appropriately address the monitoring of such activities in businesses. Many areas of the regulations are either unclear or inconsistent, causing confusion on the part of both employer and employee. This paper will examine the existing laws of the United States and the European Union, including the United Kingdom and Ireland, to address the outdated and vague aspects of the law. Cases heard in both the United States and the European Union will be analyzed, demonstrating the inconsistencies and emphasizing the confusion. With this information, recommendations will be made to reduce or eliminate the problems, as well as modernize the existing regulations.

ATTITUDES TOWARDS GLOBALIZATION

Yanely Reyes Class of 2007 The term globalization can be defined from a world, country, industry, firm, and individual perspective. It refers to the integration resulting from a variety of activities including cross-border transactions in goods, services, and technology. This empirical research studies the differences in attitudes towards globalization across college-educated individuals in countries of differing economic development. More specifically, it


examines the extent to which skill level, consumer ethnocentrism, and cultural differences impact individual attitudes towards globalization. A total of 95, 79, and 28 questionnaires were collected in the United States, Dominican Republic, and Dubai, respectively. Empirical support was found for the hypotheses that individuals exhibiting higher levels of consumer ethnocentrism and collectivism are more opposed to globalization. Further, support was found for the Human Capital Model’s premise that a higher level of education would lead to more favorable attitudes towards globalization. However, the empirical findings did not support the hypotheses that in a developed country, lower-skilled individuals would be more opposed to globalization or that in a less developed country, lower-skilled individuals would be less opposed to globalization. COMPARISON OF SOCIALLY ETHICAL FIRMS AND PERCEIVED ETHICAL FIRMS Maria Haritos Class of 2006 The purpose of this paper is to examine if there is any value added to the stock price of companies that are perceived as being ethical (through a consumer-based survey, Harris Interactive) versus those companies that have met certain ethical standards (and are listed on the Domini Social Index) to determine whether there is any value added in being ethical. Given the recent corporate scandals that have made headlines, it is likely that ethical behavior has become a factor in consumer investing. If so, companies can no longer just focus on increasing the bottom line, while disregarding ethics. Statistical tests were run using a regression to determine whether or not there was greater value in being perceived as ethical than in actually meeting ethical qualifications. The results of this paper conclude that in fact consumer perception is more valuable to a company because the stock prices of those companies in the Harris Study were higher than those in the Domini Index and higher than those companies’ competitors. This shows that companies gain more value from


increasing their consumer’s perception of the company as being ethical and caring.

ACCULTURATION, NEED FOR UNIQUENESS, AND THE HISPANIC MARKET: THE INFLUENCE OF REFERENCE GROUPS ON THE CONSUMPTION OF CLOTHING Holly Harper Class of 2006 Acculturation describes the process of changing attitudes, values and behaviors of a subcultural group or individual after continuous exposure to a new, dominant culture. This survey-based study examines the effects of this phenomenon on the consumer behavior and the influence of reference groups on Hispanic high school students, specifically when those students are purchasing clothing. Existing literature provides evidence showing that Hispanics in general tend to be influenced more by reference groups than non-Hispanics. Therefore, it was hypothesized that high-acculturated Hispanics would be influenced less than low-acculturated Hispanics. Both Hispanic (n=80) and non-Hispanic (n=52) Catholic high school students completed a questionnaire measuring degrees of acculturation, need for uniqueness, and the influence peers, family, and the media play in their decisions when they are purchasing clothing. The results show that acculturation did not have any significant effect on reference group influence. However, Hispanics displayed a significantly low need for uniqueness compared to non-Hispanics, providing implications for further research.


IMPACT OF GRADUATE EDUCATIONAL INSTITUTIONS ON THE SPAWNING OF NEW BUSINESS ACTIVITY AND ON COMPANIES’ EMPLOYEES Joseph Cerrone Class of 2006 The purpose of this paper is to examine if there is a relationship between highly ranked graduate doctoral programs at universities and the number of employees within the university’s county in the industry related to doctoral program’s field of study. As our economy is continuously growing, the importance of intellectual labor has become increasingly significant. Certain high-growth industries are theoretically dependant on scientific advancements. The results of this paper confer that only certain doctoral programs experience this relationship. This relationship between the high-intellect individuals and companies within close proximity to the university has been shown to directly contribute to the economic growth of the specified geographic area.

INTERNATIONAL EQUILIBRIUM RELATIONSHIPS IN LATIN AMERICAN AND CARIBBEAN COUNTRIES: VOLATILE MONEY GROWTH AND HYPERINFLATION, THE FISHER EFFECT, AND UIP EXPOSED IN AN ERA OF FLOATING EXCHANGE RATES Vicken J. Kalaydjian Class of 2006

This study uses data from a sample of 30 Latin American and Caribbean countries from 1974 to 2004 to examine five relationships: the quantity theory of money (QTM), purchasing power parity (PPP), the Fisher effect, uncovered interest parity (UIP), and the money neutrality proposition. The results illustrate that the above-mentioned relationships are all interrelated concepts. The cycle starts with excessive money growth, which leads to higher inflation, and according to the Fisher Effect, higher nominal interest rates. The money neutrality proposition demonstrates that, in the


long run, money growth can only affect nominal variables, not real ones. Countries with higher inflation rates and higher nominal interest rates do in fact experience currency depreciation. The results are consistent with theoretical expectations. This study finds extreme support for PPP, QTM, and money neutrality in the long run and positive support for the Fisher Effect and UIP over a 10-year period. Equilibrium relationships become much more apparent when and where money growth and inflation are much more volatile. Since Latin American and Caribbean countries have experienced some of the most severe episodes of inflation in the past few decades, they provide greater support for certain equilibrium relationships. Although there is a vast literature on the long-run success of PPP and QTM, there has not been much support for these relationships in the short run. This paper finds strong support for PPP and QTM in periods as short as five years. In addition, this study shows that, in the long run, real growth has nothing to do with money growth.

TRANSFERRING HUMAN CAPITAL TO FOREIGN SUBSIDIARIES Amanda Pappalardo Class of 2006 U.S. parent companies cannot transfer property of any kind to foreign subsidiaries on a tax-free basis except when the taxpayer can assure the Internal Revenue Service (IRS) that the property will be used in the subsidiary’s trade or business. This paper seeks first to discover whether human capital is property, and if so, to whom it belongs. If human capital is property of the parent company, then any transfers to foreign subsidiaries would be tax-free so long as the subsidiary uses that human capital in its trade or business. If human capital is not property of the U.S. parent company, then sections 351 and 367 do not apply.


MENDING THE ALIEN TORT CLAIMS ACT

Tyson Bareis Class of 2005 For 215 years, foreign citizens have had the right to bring civil charges in U.S. District Courts under the Alien Tort Claims Act (ATCA). During this time, the scope and breadth of international law have changed greatly. Complicated by a poor understanding of the original statute and vague language, modern ATCA case law is complex and sometimes contradictory. This paper seeks to examine whether, given all the changes in international law and problems surrounding the statute, it is still possible for the ATCA to function properly. Upon answering this question, the paper will move on to propose changes in the statute and discuss the best way to go about reform. The goal of this paper is not necessarily to argue the superiority of one solution over another. Instead, this paper seeks to describe a very real problem in the justice system that will only get worse as globalization increases, and generate discussion on its possible solutions to the problem.

Y-FLUENCE: A STUDY OF GENERATION Y’S EXTENDED PURCHASING INFLUENCES Michelle DeLuca Class of 2005 Generation Y is a unique group that has a strong level of influence on spending in the economy. This study attempts to uncover the extent of the group’s sphere of influence exhibited by the purchases made by family members and peers. For the purpose of this study, an online survey was conducted with a sample of 106 college students. Influence on family members was tested with two product categories, cars and computers purchased within the past two years. Additionally, influence on peers was tested with two other products, clothing and music purchased within the past six months. For each product category, three statements were presented: on advice requested before purchase, advice taken into


consideration, and advice that influenced the final decision to purchase the specific product. The survey data revealed an overwhelming response from participants who feel that they influence the purchase of these products, especially with regard to peers’ decision to purchase clothing. Sufficient evidence demonstrates that the influence of Generation Y differs among various product categories and is not constant for all types of products. Additionally, gender was tested to see its connection with influence. The results were not consistent across the product categories, however. There was a significant relationship found only between gender and peers’ decision to purchase clothing.

ECONOMIC FREEDOM AND SHORT-TERM REAL INTEREST RATE PREMIA IN LESS-DEVELOPED COUNTRIES Daniel Peter Fedeyko Class of 2005 This research studies the relationship between economic freedom in less-developed countries (LDCs) and the corresponding short-term real interest rate premia required in those countries to attract creditors. Although the phenomenon of higher real interest rates in LDCs is a commonly accepted occurrence, there is still much debate over what to attribute the risk premia to and which risk factors are most significant. Previous studies have used country credit ratings, conditional economic convergence, economic growth, fiscal and monetary policy, and political freedom to explain observed premia in real interest rates. This study approaches the issue of real interest rate premia for LCDs by focusing instead on economic freedom, which is a broad measure that incorporates many of the political, legal, economic, and fiscal factors that have been applied individually in previous studies. As its measure of economic freedom, the research employs annual data collected from the Fraser Institute’s Economic Freedom of the World Index (EFW). The study compiles average EFW scores and average real interest rate spreads for 60 countries from 1995 to 2002. Regression analyses based on this data show a significant negative relationship between economic freedom and real interest rate premia (lower premia for economically free countries), which becomes stronger as the countries are grouped by region (Asia, Africa, Latin America, Eastern Europe, OECD). The study concludes by examining the


relationship between real interest rate spreads and individual components of the EFW index, such as property rights and freedom to trade. The results of these analyses show that economic freedom and several components of the EFW index have significant explanatory value in determining short-term real interest rate premia and should therefore be a considered criterion when making investments in emerging market sovereign debt. ____________________________________________________________

THE FUTURE OF MUSIC IN A DIGITAL AGE

Lori A. Morea Class of 2005 Every day, the world around us is changing as new technology is developed and introduced. Peer-to-peer technology offers a wide array of opportunities for enhanced communication capabilities and content distribution, but it also has led to massive music piracy and destructive consequences for the music business. In an effort to preserve its profits and protect its copyrighted works, the recording industry has fought hard against music piracy, filing lawsuits against both peer-to-peer services and individual copyright infringers. As these strategies have proven to be costly and time-consuming for the industry, many other means of preventing the harmful effects of music piracy on performing artists have been analyzed. Although Congress has suggested the possibility of increasing criminal penalties for copyright infringement over peer-to-peer networks, it is surely too severe to punish such a large number of Americans by requiring them to pay enormous fines or serve jail time for enjoying the benefits that new technology has to offer. As a result of the limited effectiveness of all strategies implemented by the recording industry to date, an alternative compensation system should be considered that would simultaneously compensate artists and allow the unobstructed use of peer-to-peer technology and file-sharing. A system to replace the seemingly outdated traditional copyright law that currently hinders the endless potential of peer-to-peer networks to encourage creativity and innovation would be a successful step toward fully embracing new technology and entering a world of digital music.


THE RELATIONSHIP BETWEEN FEDERAL GOVERNMENT EXPENDITURES ON EDUCATION AND MEDIAN INCOME OF U.S. CITIZENS Brendan T. Marshall Class of 2005 This study examines the level of federal spending on education at the elementary, secondary, and post-secondary level. It then compares the level of spending to the median income levels of various groups that are distinct in gender, race, and level of education. Previous studies have been conducted to examine personal returns on investment in regard to education, but none have taken the government’s perspective. This study takes the two variables, federal spending and median income, and examines them through the lens of regression analysis. The results indicate a strong correlation between federal spending and median income. The study also derives an optimal level of federal spending to generate the highest level of median income. Surprisingly, after thorough background analysis, the federal government has not tried to apply such regressions to its investment behavior, suggesting a poor management of taxpayer’s money. Therefore, this study can possibly help the government form a methodology to realize how it can maximize its returns on investment.

BUILT TO LAST: WHERE ARE THEY NOW?

Rebecca A. Nielsen Class of 2005 This study is a follow-up to the bestselling book Built to Last by James Collins and Jerry Porras. Collins and Porras chose 18 exceptionally performing visionary companies, then detailed the features, including core ideology, that distinguished these companies from a control set of comparison companies. The study followed the 36 companies from their first year of operation until around 1990. This study looks at the past 15 years of data on these companies, from 1989 to 2004. The companies were


first analyzed financially, based on their annual return. Next, they were analyzed by their corporate social performance, a piece of core ideology, based on data provided by KLD Research and Analytics. It was initially thought that the visionary companies would outperform the comparison companies in the financial arena, but surprisingly, the results were rather inconclusive. The major finding of this study shows that visionary companies have better relationships with important primary stakeholders through the operating practices that are assessed in determining corporate social performance. This shows that the 18 visionary companies featured in Built to Last have retained the visions and values that comprise the core ideologies on which they were founded.

A MONETARY UNION IN LATIN AMERICA

Alejandro L. Rivera Class of 2004 This paper discusses the possibility of a monetary union in Latin America. Arguments in favor of monetary unions are presented to support the notion of a currency area in Latin America. Inflation rates, interest rates, government deficit to GDP ratios, and real GDP growth rates are analyzed in order to determine whether either Mercosur or the Andean Community could support a monetary union. The results of the analysis suggest that Mercosur could be a starting point for a Latin American monetary union provided that the countries meet the convergence criteria and the countries follow similar cyclical behavior.

A COMMUNITY-WIDE BOLAR PROVISION FOR THE EU

Salvatore Giovine Class of 2004 This study provides insight on an area of pharmaceutical law in the European Union known as the Bolar provision. This relatively new area of


European Union law has been the subject of much recent debate with regard to the form a Bolar provision should take. A Bolar provision allows all development, testing, and experimental work required for the registration of a generic medicine to take place during the patent period of the original product. The study sets forth a proposal for a European Bolar provision. The nature, feasibility, implementation, and possible outcomes of the proposed Bolar provision are presented. As pharmaceutical innovation continues to create revolutionary products on a global level, it is increasingly important to understand the legal and economic forces at work in the pharmaceutical industry. On a legal level, intellectual property protection is the most relevant issue; on an economic level, competition theory plays a major role in defining an industry with a market capitalization well into the billions of dollars. This study will provide background information on the nature of the European Union in terms of its political, legal, and economic structure. With this clear understanding of the nature of the European Union, an explanation of intellectual property law as it applies to pharmaceutical products is presented. Such terms as “generic” and “experimental use” are defined in context. Having set the conceptual basis for understanding the issue at hand, the study defines in detail what a Bolar provision is and uses the United States’ Hatch-Waxman Act as a case study to understand how a Bolar provision functions. The issues presented are then applied to the European Union. The case law of Member States with regard to experimental use is analyzed to understand its nature, form, and compatibility with the proposed provision. Furthermore, the compatibility of a Bolar provision with international trade agreements is analyzed. Through the analysis of European case law and international trade agreements, conclusions are drawn with regard to the probability that the proposed provision could be implemented. Given the material amount of legal precedent that the Bolar provision overrides, the study turns to why a Bolar provision should become a part of European Union law and outlines the nature of the proposed provision. Through macroeconomic statistics, corporate finance theory, systems theory, and mathematical models, the outcomes that the implementation of a pure Bolar provision would create are analyzed. The study presents these outcomes through an Economic Outcome Model. The Economic Outcome Model is also used to reject the Bolar provisions recently suggested by the European Council on the basis that they constitute a diluted form of Bolar provision whose restrictive parameters patently defeat the purpose of implementing such a provision. The study presents the underlying reasoning of this rejection and compares and


contrasts the Bolar provision it proposes with those that have recently been suggested by the European Union. The Bolar provision this study advocates should not be viewed as the only solution to the problems the European pharmaceutical industry faces. As such, this study presents policy recommendations beyond the Bolar provision which, when combined with the Bolar provision, would result in positive outcomes on a variety of levels.

TITLE IX: A NEW FORMULA FOR EQUITY

Michael Nolan Class of 2004 Title IX has been a great success in creating opportunities for women in sports on the high school, collegiate, and professional levels. The law was written in 1972 to cover a broad scope of educational areas. The first regulations dealing with collegiate athletics were written in 1979. These statutes created three criteria for equality in collegiate athletics. First, proportions of male and female athletes must roughly equal the proportion of males and females in the student body. Second, the school must show a history of helping the underrepresented sex. Third, a university’s athletics offerings must fully meet the interests of the underrepresented sex. Over the years since, many universities made strides to create equality in their respective athletics programs. In 1997, a monumental court case changed how Title IX is enforced. The lawsuit, Cohen v. Brown (Brown University), created the “proportionality test” as the standard for the enforcement of Title IX. These statutes imply that the second and third criteria of the original statute are not quantifiable. Therefore, a proportionality test will be the standard by which gender equity is judged. The proportion of female athletes must roughly equal the number of male athletes. After Cohen v. Brown, many schools, fearing lawsuits, quickly cut male athletics teams to save their program from being sued. Critics contend the proportionality test has led to the elimination of more than 400 male sports to since 1979. This paper contends that cutting men’s programs is not in the spirit of the original law. This paper presents a new formula that will preserve the future of women’s sports and stem the tide of men’s teams being eliminated to create proportionality. The proposed solution is to institute a revised proportionality test that holds universities responsible for meeting


the standards of the underrepresented sex, but excludes men’s football and men’s basketball from the proportionality formulation. Football and men’s basketball generate the vast majority of money used to fund the entire spectrum of collegiate sports. They have morphed away from the average collegiate sport and should not be taken into account when formulating equality.

THE EFFECTS OF TERRORISM ON DISASTER RECOVERY PLANNING IN INFORMATION Frank Novick Class of 2004 The concept of terrorism plagues our society. The threat of terrorism is felt by everyone from politicians to business people. The mere mention of the word terrorism puts an extreme amount of fear into people worldwide. The business world has had a tough job of adjusting to the extra stress that terrorism is putting on it. The effects of terrorism and the threat of terrorism have already had on the business world are one issue; being prepared for future threats is an entirely different issue. This paper will discuss terrorism and its effects on disaster recovery plans and business continuity plans. Examinations of case studies and survey data are used in order to prove various points.

CONSUMER SOCIALIZATION AND THE EFFECTS THAT THE LATINO MOTHER HAS ON HER CHILD’S BRAND PREFERENCES FOR PERSONAL CARE PRODUCTS Rita M. O’Neill Class of 2004 This research aims to make a connection between Latino mothers and their children’s consumer behavior. First, this paper gives background information about consumer socialization, the influence of mothers, and


the value of the Latino community in the United States. Then, hypotheses are laid out suspecting that there is a strong maternal influence over Latino children, more so than that of non-Latino mothers. These hypotheses have been either supported or not supported based on the statistical analyses performed. Overall, this research has shown that there is definitely a great influence on Latino children by their mothers. Tests show that Latino children are more influenced by their mothers than non-Latino children when purchasing a brand of personal care items they’ve never used before. Also, they were more likely to ask for their mothers’ advice when purchasing a new brand of personal care items than they were when purchasing items in other product categories. Further research is suggested with a larger sample size, different age groups, and different product categories. This particular research has started the process of uncovering the important relationship between a Latino adolescent and his or her mother. Although it is only a start, it begins to shed light on the ever-growing and important Latino market.

EFFECTS OF THE EURO-MEDITERRANEAN PARTNERSHIP

Noam Pitsker Class of 2004 Tunisia has begun the implementation of the Euro-Mediterranean Partnership (EMP), a bilateral free trade agreement between Tunisia and the European Union (EU), with hopes of furthering economic development and decreasing its high unemployment rate. This study presents a two-step analysis in determining the effect of the EMP on unemployment in Tunisia. The first analysis compares the changes in exports, imports, GDP growth, industry production, foreign direct investment (FDI), and unemployment rate before and after countries joined the EU. This analysis indicates that exports, imports, FDI, and unemployment rate are positively correlated with EU membership; industry production is negatively correlated with EU membership; and the correlation of GDP growth and EU membership is ambiguous. Second, this study uses a multivariable regression analysis to determine the effect of each of the variables mentioned above, plus a dummy variable to account for EU membership, on the dependent variable, unemployment


rate. The regression analysis found that exports, imports, and the EU variable significantly affect unemployment rate. Even though imports have the most significant effect on unemployment rate, exports have the largest impact or change on the unemployment rate.

AN EXAMINATION OF THE NEGATIVE PRICE REACTION FOLLOWING DIVIDEND REDUCTION ANNOUNCEMENTS: A COMPARISON OF THE EXPLANATORY POWER OF FIVE SCENARIOS Joseph A. Siano Class of 2004 This study examines the explanatory power of five scenarios on the negative stock price reaction that occurs immediately after a company issues a dividend reduction announcement. The scenarios tested are: announcements of dividend omissions, dividend reductions of a large magnitude, growth-induced dividend reductions, dividend reductions by firms with small-market capitalizations (small-cap firms), and involuntary dividend reductions. A sample of 93 dividend-reducing firms was collected and abnormal returns were calculated for each firm. Then the sample was separated into two mutually exclusive groups for each scenario, and analysis of variance (ANOVA) tests were conducted to determine if there were any significant differences in mean abnormal returns. Additionally, stepwise multiple regressions were run to ascertain which scenarios most significantly contribute to the negative abnormal price returns. The results of the ANOVA and stepwise multiple regressions suggest that dividend reduction announcements by small-cap firms and involuntary dividend reduction announcements cause significantly greater negative abnormal returns.


WHERE DO WE GO FROM HERE? THE NEW STRUCTURE OF INDIVIDUAL DISPARATE TREATMENT Stacey L. Wieder Class of 2004 The structure for litigating individual disparate treatment cases has always hindered the process of deciding Title VII discrimination claims. From the conception of the McDonnell Douglas three-step burden-shifting structure to Justice O’Connor’s concurrence in Price WaterHouse Inc. v. Hopkins to the varying standards of direct evidence required by different circuits for mixed-motive instructions, the courts have never operated under a unified system. Then in June 2003, the Supreme Court decided Desert Palace Inc. v. Costa and changed the structure of individual disparate treatment forever. This paper critiques that structure, tracking the changes that resulted from prominent decisions and analyzing the lower court interpretations of Costa. It then proceeds to articulate a unified system under which all Title VII discrimination claims should be decided and offers an alteration in the use of the same-decision partial affirmative defense that is available to defendants in mixed-motive cases. The paper cites the limitation of the bona fide occupational qualification affirmative defense in systematic disparate treatment cases, the lack of a damage cap for race discrimination by the 1991 Civil Rights Act, the court’s use of mandatory affirmative action plans targeting racial and ethnic minorities, as well as the history of United States and national figures such as Martin Luther King Jr., as support for its proposal to ban the use of the same-decision partial affirmative defense in racial discrimination cases. Though it may not solve the puzzle that is the structure of individual disparate treatment, this paper hopes to simplify at least one small section in an effort to unify the system.


THE EFFECT OF DIVIDEND TAX RELIEF IN THE UNITED STATES Chao (Kelly) Yan Class of 2004 The purpose of this research is to determine whether President Bush’s (2003) dividend tax cut meets the needs of the current economy. The stated purpose of President Bush’s dividend tax cut and other tax cuts included in Bush’s Plan for Jobs and Economic Growth is to encourage customer spending and restore investors’ belief in the stock market after the recent accounting scandals. Bush believes that his tax cuts will immediately stimulate the economy, which will lead to more investing—from both individual investors and corporate investors—and thus eventually promote economic growth through the creation of jobs. The debates between the pros and cons of dividend tax cuts have existed before the emergence of President Bush’s proposal. Economists, accountants, politicians, and others have presented various beneficial and non-beneficial reasons for their positions. According to proponents of dividend tax cuts, some benefits include: increased dividend payments, additional after-tax income for senior citizens, and decreased corporate debt. On the other hand, opponents of dividend tax cuts cite the following non-beneficial aspects: benefits for the wealthy, increased complexity of the tax code, decreased tax collection, and increased U.S. federal deficit.


LIST OF THESIS TITLES AND AUTHORS SINCE 2003

2010–2011 Theses “Oscarnomics: Evaluating the Economic Worth of the Academy Awards,”

Jack Braithwaite, Max Honerkamp, Jim Sheilds, and Jillian Switzer

“The Michael Vick Dogfighting Case: A Cultural Litmus Test for the

Decision-Making of Advocacy Groups,” Solange E. Badamo, Steven J. Burgermeister, Sidney Henne, and Sean T. Murphy

“BRIC IPOs: How Do Capital Market and Economic Activities in

Emerging Markets Relate?” Robert Gu and Hoi Yeung Luk “Understanding the Formation of Underwriting Syndicates in Emerging

Nations,” John Keany and Daniel Sawyer “Fund-Management Gender Composition: The Impact on Risk and

Performance of Mutual Funds and Hedge Funds,” Angela Luongo “Project 1012: Gentrification in Amsterdam's Red Light District,”

Benjamin Garstka “Do Energy Prices Drive M&A Activity in the Energy Sector?” Bohdan

Ivantsyk “Countering Counterfeits: An Investigation of Message-Frame and

Message-Focus Effects on Persuasion,” Caroline Dahlgren “Online Social Lending: U.S. vs. U.K.,” Kevin McAleer “The Effect of the May 6, 2010 ‘Flash Crash’ on Market Volatility,”

Nicholas Veliky “An Examination of Personal Pronoun Usage in Brand Names,” Nicole

Palermo


“The Relationship Between Socioeconomic Status and Emotional Gratification for Consumers Who Purchase Overtly Branded (Overtly Designer) Goods,” Sarah Siracusa

“Sustainability Marketing: Effects on Product Evaluation from Consumer

Attitude Influences,” Stephanie Yu “The Effect of Taxes on the Chinese Capital Markets,” Tiantian Wan

2009–2010 Theses “An Empirical Study of the Stock Market Effect of Auditor Switch

Decisions on Arthur Andersen Clients in 2002,” Cathryn Bennett “REIT Pricing Relative to NAV: The Leverage Factor; Evidence From the

Economic Crisis,” Daniel Carr “The Effects on Consumers of the Digitalization of Newspapers,” Danielle

Gasbarro “Bank Lending News During Bubbles: Recent Evidence,” Ian D. Taylor “Defining and Regulating Information Privacy: The Legal and Ethical

Ramifications in the American Workplace,” Michael Keute “The Effect of XBRL on the Trading Volume of U.S. Companies,”

Scarlett Eva Lilian Sieber

2008–2009 Theses “Investment Sub-Styles Based on Individual Hedge Funds’ Investment

Strategy Risk Premiums,” Erin Perkins “An Exploratory Study of a Utility-Based Music Consumption Model,”

James Domzalski


“Study of U.S. Users of Financial Statements’ Sentiments About SEC’s Proposal for Mandatory Adoption of International Financial Reporting Standards,” Paul Neubecker

“Hedge Funds and the Mortgage Crisis,” Sean Wise “The Sarbanes-Oxley Act of 2002: Its Impact on CPA Violations,” Steven

DeGrand

2007–2008 Theses

“An Integrated Model of Consumer Acceptance of SMS Advertising,” Brynn Moynihan

“The Effect of Individualist and Collectivist Cultural Orientation on Consumers’ Luxury Product Consumption,” Cristina Garcia

“Mass Customization and the Fashion Industry,” Jillian Hastings

“The Impact of Debt Policies on Outside Director Compensation and Incentives,” Josephine Simolacaj

2006–2007 Theses

“The Changing Correlation of Fiscal and Current Account Balances,” Amy Engel

“The Effectiveness and Legitimacy of the Practice and Provisions of Earnings Stripping,” Anthony R. Scinto

“Immigration and its Impact on the Unemployment Rate of Native-Born Agricultural Workers in the United States,” Caitlin E. Leary

“Does Brand Personality Depend on Country of Origin?” Christine D’Angelo

“Perceived Consumer Effectiveness and Environmental Locus of Control as Moderators of Environmentally Conscious Behaviors,” Laura Greenwood


“Monitoring Electronic Communications in the Workplace,” Nikki Pappas

“Attitudes Towards Globalization,” Yanely Reyes

2005–2006 Theses

“Comparison of Socially Ethical Firms and Perceived Ethical Firms,” Maria Haritos

“Performance of Chi Traded Entities: Evidence from Chinese H-Shares,” Harry Carsch

“Executive Compensation in M&A: Examining Failed Versus Completed Transactions,” Tracey LaFrano

“Acculturation, Need for Uniqueness and the Hispanic Market: The Influence of Reference Groups on the Consumption of Clothing,” Holly Harper

“Impact of Graduate Educational Institutions on the Spawning of New Business Activity and on Companies’ Employees,” Joseph Cerrone

“International Equilibrium Relationships in Latin American and Caribbean Countries: Volatile Money Growth and Hyperinflation, the Fisher Effect, and UIP Exposed in an Era of Floating Exchange Rates,” Vicken J. Kalaydjian

“Transferring Human Capital to Foreign Subsidiaries,” Amanda Pappalardo

“Are Reconciliations Between Foreign GAAP and U.S. GAAP on Form 20-F Really Useful? An Empirical Study,” Danielle Pashun

2004–2005 Theses

“Mending the Alien Tort Claims Act,” Tyson Bareis

“Y-fluence: A Study of Generation Y’s Extended Purchasing Influences,” Michelle DeLuca

“Economic Freedom and Short-Term Real Interest Rate Premia in Less-Developed Countries,” Daniel Peter Fedeyko


“The Future of Music in a Digital Age,” Lori A. Morea

“Does Brand Personality Depend on Country of Origin?” Christine D’Angelo

“The Relationship Between Federal Government Expenditures on Education and Median Income of U.S. Citizens,” Brendan T. Marshall

“Built to Last: Where Are They Now?” Rebecca A. Nielsen

2003–2004 Theses

“The Elasticity of Demand of Food Consumption and the Substitutability of Convenience and Luxury Restaurants,” Emmanuel Zavolas

“An Assessment of the Impact of the Sarbanes-Oxley Act of 2002 (SOA) on Investor Confidence in U.S. Capital Markets and in the Quality of Financial Reporting,” Kate Raymond

“A Monetary Union in Latin America,” Alejandro L. Rivera

“A Community-Wide Bolar Provision for the EU,” Salvatore Giovine

“Title IX: A New Formula for Equity,” Michael Nolan

“The Effects of Terrorism on Disaster Recovery Planning in Information,” Frank Novick

“Consumer Socialization and the Effects that the Latino Mother Has on Her Child’s Brand Preferences for Personal Care Products,” Rita M. O'Neill

“Effects of the Euro-Mediterranean Partnership,” Noam Pitsker

“An Examination of the Negative Price Reaction Following Dividend Reduction Announcements: A Comparison of the Explanatory Power of Five Scenarios,” Joseph A. Siano

“Where Do We Go From Here? The New Structure of Individual Disparate Treatment,” Stacey L. Wieder

“The Effect of Dividend Tax Relief in the United States,” Chao (Kelly) Yan


THE FORDHAM BUSINESS STUDENT RESEARCH JOURNAL

Submission and Style Guidelines

All submissions and inquiries should be sent to Professor Albert N. Greco at [email protected],

I. BODY OF PAPER/CONTENT GUIDELINES

Abstract

The abstract should be in 12-point type, double-spaced, and not more than 100 words.

General Text

All text must be in 12-point type and double-spaced. Text must be in literary present tense throughout. For example,

“we predict the dependent variable” rather than “we predicted the dependent variable.” Use past tense when describing historical events. For example, “investors sold shares in our sample” rather than “investors sell shares in our sample.”

Do not use all caps for any text. Grammar, spelling, and punctuation corrections must be made. Do not start a sentence with notations (i.e., variables). Adverb phrases do not need to be hyphenated (e.g., actively managed,

not actively-managed). Bullet points or small roman numerals (e.g., (i), (ii), etc.) may be used to

list items. Please indicate the location of the figures and tables in the text.


Dates Dates should be written as 1980 to 1990 in the text. It is acceptable

to use 1980–90 or 1980–1990 for tables, but the format should be used consistently.

Math/Variables Use the percent symbol (%) for percentages, not the word

“percent.” Lengthy mathematical proofs and very extensive, detailed tables

should be placed in an appendix or omitted entirely. All equations, except very short mathematical expressions, should

be displayed on a separate line and centered. Equations should be numbered consecutively in the right margin

with Arabic numerals in parentheses. References to variables in the body of the paper (after its

introduction and in equations), whether a name or letter, should be italicized. Examples: p-value, t-statistic, Dummy-Year.

Sections and Subsections

The introduction is not numbered as a separate section, nor is it titled.

Only the very first paragraph of the introduction is not indented. All subsequent paragraphs are indented.

Section I should be the first section following the introduction. The final paragraph of the introduction should outline the

remainder of the paper. Sections are numbered with Roman numerals. Subsection headings

should be lettered A, B, C, etc. Subsubsection headings should be lettered A.1., A.2., etc. (See

format examples below.)

Appendices

Appendices should be lettered A, B, C, etc. If there is only one appendix, there is no need to letter it A. Tables within an appendix should be lettered AI. Equations within the appendix should be numbered A1, A2, etc.


Tables

Tables are numbered with Roman numerals and must have a title and descriptive legend.

The legend must define all variables and briefly explain what the table shows.

Tables must be self-contained, requiring no further information from other sources to make them understandable.

Indicate the location of the tables in the margin of the text of the paper.

Figures

Figures are numbered with Arabic numerals and must have a caption. There should also be a descriptive legend if necessary to explain what the figure shows.

Indicate the location of the figures in the margin of the text of the paper.

Endnotes

Use endnotes. Do not use footnotes. Endnotes must be on a separate page at the end of the paper, in 12-

point type and double-spaced.

References

References in the text are by author(s) and date of publication. For example, Tufano (1996) or (Tufano (1996)).

Use the phrase “et al.” in italics when referencing a source with four or more authors. For example: (Leven et al. (1999)).

All references mentioned in the text must be included in the list of references and vice versa. References must be on a separate page at the end of the paper, unnumbered and double spaced. References must include first names of all authors.

References to data sources within the body of the paper or the tables should be italicized.

Research and consulting firms do not need to be referenced. Personal communications should be left as endnotes.


II. SECTIONAL FORMATS

Title Page

Title of Paper

AUTHOR(S) FULL NAMES(S)* [If multiple, separate by comma or “and” before final name.]

ABSTRACT

Text of abstract is strictly limited to 100 words, is slightly indented from

margins, and text is block justified.

*The name of the faculty adviser(s): “The author(s) thank(s) . . .” Use full names for all acknowledgments.

Body of Paper

I. Here Is the Title of the First Section


Indent the first line of all paragraphs. Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxx

A. This Is the Format for Subsection A

A.1. This Is the Format for a Subsection of a Subsection

Indent paragraph

A.2. This Is the Format for a Subsection of a Subsection

Indent paragraph

B. This Is the Format for Subsection B

B.1 Regression Variables [for example]

Here is a list of the regression variables we used in our paper. Xxxxxxxxxxxxxxxxxxxx xxxxxx

VARIABLE1 – xxxxxxxxxxxxxxxxx

VARIABLE2 – xxxxxxxxxxxxxxxxx

B.2. Explanatory Variables [for example]

Firm size: Logarithm of the number of firm employees in 1992. Source: SMF.


Firm leverage: Ratio of total sales in 1994 to beginning-of-period total bank debt. Source: SMF (sales) and CR (bank debt).

C. Formulas and Empirical Model

The basis of our model relies on the equation [for example]

a + b = c,

where

a(E) = E[d + k].

Optimal trading, given this physical nonnegativity constraint, implies that equilibrium spot prices and aggregate inventory must jointly satisfy

P = 1 + f[H]

H f[G] + 23

D. Empirical Implications [for example]

Here is an example of how propositions, proofs, and corollaries should be given in the paper. Xxxxx xxxxxxxxxxxxx xxxxxxxxxxxxxxxxxx xxxxxxxxxxxxx


PROPOSITION 1: The equilibrium with single banking described in Proposition 1 obtains when the probability of a liquidity crisis…

Proof: See Appendix A [or the proof may be given here]

COROLLARY 1.1 (Inventory): Consider two inventory processes…

PROPOSITION 2: A stationary rational expectations equilibrium exists and has the following properties:

(a) the equilibrium inventory…

(b) a unique finite upper bound…for all variables, and

(c) the equilibrium spot price…for all variables.

COROLLARY 2.1 (Properties of J): In a rational expectations equilibrium…

COROLLARY 2.2 (Regeneration): In the rational expectations equilibrium with…


Appendix Examples

Appendix A. Proofs

[Note: If there is only one appendix, then LEMMA 1]

LEMMA A1: Given the finite horizon, variables…

Proof of Lemma A1: To prove that condition (5) is sufficient, notice that expected profits of uninformed lenders is …xxxxxxxxxxxxxxxx… To this end, rewrite equation (3) as

a + b = c,

where

a(E) = E[d + k].

III. REFERENCE FORMATS (Examples)

Periodicals:

Scholes, Myron, 1991, Stock and compensation, Journal of Finance 46, 803–823.

Wright, Brian D., and Jefrey C. Williams, 1989, A theory of negative prices for storage, Journal of Futures Markets 9, 1–13.


Schwert, G. William, 1993, The Journal of Financial Economics: A retrospective evaluation (1974–91), Journal of Financial Economics 33, 369–424.

Monograph (Books):

Fama, Eugene F., and Merton H. Miller, 1972, The Theory of Finance (The Dryden Press, Hinsdale, IL).

Keynes, John Maynard, 1930, A Treatise on Money, Vol. II (Macmillan, London).

Contributions to Collective Work:

Grossman, Sanford J., and Oliver D. Hart, 1982, Corporate financial structure and managerial incentives, in John J. McCall, ed.: The Economics of Information and Uncertainty (University of Chicago Press).

Government Documents:

Securities and Exchange Commission Release No. 24-2446, 1940.

National Association of Securities Dealers, 1998, Notice to Members 98-88.

Committee on Ways and Means, U.S. House of Representatives, 1992, Overview of Entitlement Programs, 1992 Green Book.

Kennickell, Arthur, 1992, Imputation of the 1989 survey of consumer finances: Multiple imputation and stochastic relaxation, manuscript, Federal Reserve Board.


U.K. Parliament, 1960, Committee on the Working of the Monetary System [Radcliffe Committee], Principal memoranda of evidence, Vol. 1, London.

Magazines and Newspapers:

The Economist, 1998, Overcharging underwriters, June 27.

Morgenson, Gretchen, 1998, Stock options are not a free lunch, Forbes, May 18.

Lowenstein, Roger, 1997, Street’s incredible unshrinking spread, Wall Street Journal, April 10, C1.

University Papers:

Buchinsky, Moshe, and Oved Yosha, 1995, Evaluating the probability of failure of a banking firm, Cowles Foundation Discussion paper no. 1108, Yale University.

Ongena, Steven, and David C. Smith, 1998, What determines the number of bank relationships? Cross-country evidence, Unpublished manuscript, Norwegian School of Management.

Ang, Andrew, and Geert Bekaert, 1998, Regime switches in interest rates, NBER Working paper 6508, Stanford University.

Clarida, Richard, Jordi Gali, and Mark Gertler, 1997, Monetary policy rules and macroeconomic stability; Evidence and some theory, mimeo, Columbia University.


Routledge, Bryan R., Duane J. Seppi, and Chester S. Spatt, 1999, The “spark spread”: An equilibrium model of cross-commodity price relationships in electricity, Working paper, Carnegie Mellon University.

Institutes and Foundations:

Conroy, Robert, Robert S. Harris, and Young Park, 1994, Analysts’ Earnings Forecast Accuracy in Japan and the United Sates, The Research Foundation of the Institute of Chartered Financial Analysts, August.

Livingston, Miles, and Davis Gregory, 1989, The Stripping of U.S. Treasury Securities (Salomon Brothers Center for the Study of Financial Institutions, New York University, New York).

Research/Data Sources:

Herzfeld, Thomas J., The Thomas J. Herzfeld Encyclopedia of Closed-End Funds, 1989/90, 1990/91, 1991/92, and 1992/93 (Thomas J. Herzfeld Advisors, Inc., Miami, FL).

Wiesenberger’s Statistical Survey of Closed-Enid Investment Companies, various years.