scholarly journals Reference Prices and Turnover: Evidence from Small-Capitalization Stocks

2021 ◽  
Vol 14 (1) ◽  
pp. 29
Author(s):  
Ashish Pandey
Keyword(s):  
Financial Markets ◽  
Reference Price ◽  
Purchase Intention ◽  
Firm Level ◽  
Reference Prices ◽  
Product Pricing ◽  
Price Range ◽  
Portfolio Managers ◽  
Stock Market Investors

A large amount of literature in the field of social psychology and product pricing discusses the role of reference prices in affecting buyer’s price perception and purchase intention. Reference price denotes a standard against which the consumer compares the offer price of a product. In this paper, we investigate whether reference prices play any role in affecting the trading decision of stock market investors. We use firm-level, fixed-effect panel data methodology to empirically investigate whether investors respond to a violation of their internalized reference price range by executing a trading decision. Our results, based on a sample of Indian firms with small capitalization, show that investors respond to a violation of their internalized reference price range by executing a trading decision. However, consistent with the prior findings that investors suffer from myopic loss aversion, they continue to hold the positions when the reference price range is violated on the downside but sell stocks that have violated the high point of the reference price range. Our findings are robust for the reference price ranges that are constructed using the prior day’s trading prices, prior week’s trading prices, and prior year’s trading prices. The portfolio managers can develop a better understanding of expected trading intensity by incorporating reference price range in their models. The policymakers can use our results to find ways to improve the liquidity and efficiency of financial markets.

scholarly journals When Internal Reference Prices and Price Expectations Diverge: The Role of Confidence

2007 ◽  
Vol 44 (3) ◽  
pp. 401-409 ◽  
Author(s):  
Manoj Thomas ◽  
Geeta Menon
Keyword(s):  
Reference Price ◽  
Internal Reference ◽  
Price Expectations ◽  
Price Expectation ◽  
Reference Prices ◽  
Internal Reference Price ◽  
Pricing Theory

When do internal reference prices differ from articulated price expectations? The authors propose that the internal reference price depends not only on the magnitude of the expected price but also on the confidence associated with this expectation. Four experiments delineate the effects of price expectation and confidence on the internal reference price. In Experiments 1 and 2, the authors manipulate repetition and examine the effects of repetition-induced confidence on price judgments. In Experiments 3 and 4, they manipulate confidence directly to investigate its effects on judgments. The results from all four experiments suggest that consumers with less confidence have higher internal reference prices than more confident consumers, even when they do not differ in their articulated price expectations. The authors discuss the implications of these results for pricing theory.

Theory of Behavioral Finance

2015 ◽  
pp. 1-24 ◽  
Author(s):  
Jaya M. Prosad ◽  
Sujata Kapoor ◽  
Jhumur Sengupta
Keyword(s):  
Financial Markets ◽  
Prospect Theory ◽  
Behavioral Finance ◽  
Individual Investors ◽  
Market Conditions ◽  
Market Anomalies ◽  
Behavioral Theories ◽  
Portfolio Managers ◽  
Academic Events

This chapter explores the evolution of modern behavioral finance theories from the traditional framework. It focuses on three main issues. First, it analyzes the importance of standard finance theories and the situations where they become insufficient i.e. market anomalies. Second, it signifies the role of behavioral finance in narrowing down the gaps between traditional finance theories and actual market conditions. This involves the substitution of standard finance theories with more realistic behavioral theories like the prospect theory (Kahneman & Tversky, 1979). In the end, it provides a synthesis of academic events that substantiate the presence of behavioral biases, their underlying psychology and their impact on financial markets. This chapter also highlights the implications of behavior biases on financial practitioners like market experts, portfolio managers and individual investors. The chapter concludes with providing the limitations and future scope of research in behavioral finance.

scholarly journals EXPRESS: Perceived vs. Negotiated Discounts: The Role of Advertised Reference Prices in Price Negotiations

2021 ◽  
pp. 002224372110344
Author(s):  
Pranav Jindal
Keyword(s):  
Decision Making ◽  
Reference Price ◽  
Durable Goods ◽  
Purchase Decisions ◽  
Lab Experiment ◽  
Multiple Products ◽  
Reference Prices ◽  
Price Negotiations ◽  
Posted Price

Retailers routinely present a posted price together with a higher advertised reference price, in an effort to evoke a perception of the discount the consumer is receiving. If prices can be negotiated though, what impact does this initial perceived discount (IPD) have on the ultimate discount, demand, and revenue? With data from consumers of a large durable goods retailer, in a natural decision-making environment, this study provides evidence that a greater IPD is associated with smaller negotiated discounts. Then, a lab experiment involving negotiation and purchase decisions for multiple products, with randomly assigned values of the IPD, establishes that a $1 increase in IPD lowers the negotiated discount by 4.7 cents. Furthermore, 75% of this decrease can be attributed to reduction in the participants' likelihood to initiate a negotiation. Under bargaining, almost half of the increase in revenue from a higher IPD stems from an increase in the negotiated price, which is unlike fixed pricing, in which setting an increase in IPD affects revenue only through changes in demand. Sellers also have a greater incentive to set exaggerated advertised reference prices in bargaining contexts, compared with fixed pricing. These findings in turn have implications for researchers, retailers, and consumers.

Advertised reference price and sales price as anchors of the latitude of expected price and its impact on purchase intention

2017 ◽  
Vol 51 (9/10) ◽  
pp. 1597-1611 ◽  
Author(s):  
Rajesh Kumar Sinha ◽  
Atanu Adhikari
Keyword(s):  
Reference Price ◽  
Purchase Intention ◽  
Sales Price ◽  
Content Type ◽  
Consumer Responses ◽  
Intercept Survey ◽  
Price Estimation ◽  
Quasi Experimental ◽  
Anchor Points

Purpose This paper aims to investigate the influence of advertised reference price (ARP) and sales price (SP) as anchor points on the latitude of expected price, and subsequently on purchase intention (PI). The research involves the theoretical lens of selective anchoring mechanism, which allows investigation of the influence of ARP and SP in a situation where price estimation task is a “non-thoughtful processes”. Design/methodology/approach On the basis of quasi-experimental design, the study involves intercept survey of 142 shoppers. Findings The study finds that due to anchoring effect, the highest and the lowest expected prices shift toward ARP and SP, respectively. Consequently, it influences the latitude of expected price, which in turn influences purchase intention. In addition, the study proposes and tests a method to forecast expansion and contraction of the latitude of expected price. Research limitations/implications It suggests a new mechanism to understand the simultaneous influence of ARP and SP, provides a mechanism to understand shifts in price latitude’s end-points and investigates a phenomenon with two externally provided anchors. Practical implications The study highlights the role of the latitude of expected price in understanding consumers’ response. Results suggest that a plausible ARP, when joined with an above-expectation SP, can fetch better consumer responses. Originality/value The study uniquely investigates a problem with two anchor points and two estimation targets, and proposes a construct of internal price uncertainty (IPU).

Peran Bank Syariah: Menuju Perekonomian Masyarakat Madani

2019 ◽  
Vol 1 (2) ◽  
pp. 131-144
Author(s):  
Dini Maulana Lestari ◽  
M Roif Muntaha ◽  
Immawan Azhar BA
Keyword(s):  
Financial Markets ◽  
Islamic Law ◽  
Financial Service ◽  
Islamic Banks ◽  
Free Society ◽  
The Public ◽  
Turn On ◽  
The People ◽  
Strategic Role

Islamic banks are present in the community as financial institutions whose activities are based on the principles of Islamic law for the benefit of the people. This study aims to determine the strategic role of Islamic Banks as financial service institutions, the importance of the existence of Islamic Banks and Islamic-based markets and financial instruments in them. In its development, Islamic banks have a role as institutions that turn on public funds, channel funds to the public, transfer assets, liquidity, reallocation of income and transactions. In the Indonesian economic system, the existence of Islamic Banks is important as an alternative solution to the problem of conflict between bank interest and usury. Islamic financial markets and instruments provide a free society of interest and follow a different set of principles. Distribution of profit/ loss according to evidence of participation in the management fund. The division of rental income in the form of musharaka.

Role of Brand experience in Fashion brands

2019 ◽  
Vol 118 (1) ◽  
pp. 57-64
Author(s):  
G. Aiswarya ◽  
Dr. Jayasree Krishnan
Keyword(s):  
Factor Analysis ◽  
Purchase Intention ◽  
Great Influence ◽  
Brand Experience ◽  
Brand Preference ◽  
Mediating Role ◽  
Confirmatory Factor ◽  
Selling Strategies ◽  
The Impact

Traditionally the products were pushed into the hands of customers by production and selling strategies; then the marketing strategy evolved which gained momentum by understanding the customer needs and developing products satisfying those needs. This strategy is most prevalent and what should be done to stand up in this most competitive scenario? The answer to this key question is to create an experience. The customers now also seek good experiences than other benefits. Brand experience has gained more attention, especially fashion brands. Previous studies demonstrate the role of the brand experience in brand equity and other consumer behavior constructs. But very little is known about the impact of brand experiences on fashion brands. The aim of this study is to develop a model which makes our understanding better about the role of Brand preference and Brand experience and its influence on purchase intention of the brand. An initial exploratory study is conducted using a focus group to generate items for the study. The items, thus generated are prepared in the form of a questionnaire and samples were collected.  Exploratory factor analysis is conducted and the reliability of the constructs is determined. These constructs are loaded onto AMOS to perform Confirmatory factor analysis. The results confirmed the scales used. We also noticed that Brand preference has a great influence on the Brand experience. Thereby the finding supports the role of the brand experience which tends to have a mediating role in influencing the purchase intention.

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