Pedro Pimpão, Antónia Correia, João Duque and José Carlos Zorrinho
The purpose of this study is to define a model of social technology diffusion, comprising constructs that explain guests’ likelihood of recommending their hotel loyalty program to…
Abstract
Purpose
The purpose of this study is to define a model of social technology diffusion, comprising constructs that explain guests’ likelihood of recommending their hotel loyalty program to their peers.
Design/methodology/approach
The diffusion effect is explained by commitment-trust, satisfaction with user-to-user interactivity, satisfaction with user identifiability and word of mouth. A total of 2,812 usable responses were obtained through an online questionnaire sent to guests with two or more transactions with the loyalty program.
Findings
The results suggest that commitment and trust and word of mouth are crucial to enact social diffusion. As such, hotel loyalty programs need to be leveraged through enacting social diffusion.
Practical implications
Tourism and hospitality practitioners dealing with loyalty programs should create and post new trustworthy content that might be beneficial for the hotel loyalty program in their efforts to provide a more valuable experience for guests.
Originality/value
The paper provides empirical evidence that the likelihood of sharing with other guests or the intention to belong to a hotel loyalty program community exists and then goes on to offer a range of possible responses based upon four relational mediators.
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João Amaro de Matos, Rui Dilão and Bruno Ferreira
The purpose of this paper is to present an arbitrarily accurate approximation for the value of European options written on a Black‐Scholes stock paying a discrete dividend.
Abstract
Purpose
The purpose of this paper is to present an arbitrarily accurate approximation for the value of European options written on a Black‐Scholes stock paying a discrete dividend.
Design/methodology/approach
The proposed method is a computational method for the analytical solution of the problem.
Findings
It was found that the proposed method is computationally faster than any other exact computational available method, including Monte‐Carlo simulations.
Research limitations/implications
The method is applied for a single dividend payment, but can be extended for several payments. The exact amount of the dividend must be known ex‐ante, as well as the precise date of payment.
Practical implications
The paper provides the most efficient way to compute with absolute precision the value of European options on dividend‐paying assets, under the Black‐Scholes assumption.
Originality/value
The computing time in the approach is several orders of magnitude faster than with traditional Monte Carlo methods, for the same desired accuracy.
João Duque and Ana Rita Fazenda
This study concerns how well stock market regulators prevent trading by using trading halts when they suspect asymmetric information in the market. Security trading halts in the…
Abstract
This study concerns how well stock market regulators prevent trading by using trading halts when they suspect asymmetric information in the market. Security trading halts in the Portuguese stock market are analysed to measure the effectiveness of trading halts imposed by market authorities as well as their timing in interrupting and restarting trading. Stock price returns, abnormal returns and volatility are used to compare the significance of differences for pre‐and post‐halt periods. First the global sample is used to analyse abnormal returns and then it is split into good and bad news halts. A GARCH (1,1) model is also applied and found to be a more sensitive instrument on justifying trading halts. Justification for trading halts tends to rise as event window size increases, suggesting that supervisory authorities tend to spot the dominant changes better. In fact, when very short time‐sampling periods are used weaker justifications for stock halting are found. The opportunity for market authorities to interrupt trading seems to be increasing. In terms of timing they seem, on the whole, to be delayed when imposing trading halts or anticipated when authorising the restart. Nevertheless, when considering good news, although the halt tends to be late the restart seems to be on time. It is concluded that all methodologies should be jointly applied by stock watch departments of supervision authorities for detecting trading under asymmetric information, but special attention is drawn to GARCH methodologies that show superior ability for detecting changes in stock characteristics.
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José Guedes and João M. Andrade e Silva
The purpose of this paper is to further understanding of how new information impacts the market value of financial assets.
Abstract
Purpose
The purpose of this paper is to further understanding of how new information impacts the market value of financial assets.
Design/methodology/approach
The paper uses a Bayesian approach to asset valuation, whereby investors use signals conveyed by new information to update their estimate of a structural valuation parameter. The underlying distributions – i.e. the distribution of the information signal and the prior distribution of the valuation parameter – are allowed to exhibit a degree of kurtosis greater than that of the normal distribution.
Findings
The revision in asset value as a function of the realization of the information signal is an S‐shaped function (in the local region centred on the zero‐surprise level of the signal), if the distribution of the information signal features excess kurtosis; conversely, if the prior of the valuation parameter features excess kurtosis, the revision in asset value is an inverted S‐shaped function.
Research limitations/implications
The paper generates clear implications with respect to the shape of the function relating the revision in asset value to the realization of the signal only in the local region centred on the zero‐surprise level of the signal.
Practical implications
The paper helps to shed light on the well‐known empirical result that the stock price reaction to earnings' announcements is an S‐shaped function, centred on the zero‐surprise level of reported earnings.
Originality/value
In the financial accounting literature, the paper helps one to understand the role of the distributional assumptions underlying the stock price reaction to earnings' announcements, namely, the role of excess kurtosis both in reported earnings and in the prior of means earnings.
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Pedro Pimpão, Antónia Correia, João Duque and Carlos Zorrinho
This chapter aims to assess how effective loyalty programs are in contributing to retaining guests for hotels. The effectiveness is measured by means of a Bass model which allows…
Abstract
This chapter aims to assess how effective loyalty programs are in contributing to retaining guests for hotels. The effectiveness is measured by means of a Bass model which allows the measurement of the diffusion patterns of adopters within potential adopters. The data used to perform this model allow the depiction of the effect of geographical localization over a time frame of three years. Results suggest that the loyalty card’s acceptance was measured from the internal and external parameters, based on the concept of diffusion theory. The results indicated a need for innovation of the loyalty program from 2019. Due to the existence of several hotels with different typologies in different countries, a segmentation of clients by nationalities is suggested with a “waterfall” strategy being placed in the hotel chain loyalty program.
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Dimitrios I. Maditinos, Željko Šević and Nikolaos G. Theriou
The purpose of this paper is to investigate the explanatory power of two value‐based performance measurement models, Economic Value Added (EVA®) and shareholder value added (SVA)…
Abstract
Purpose
The purpose of this paper is to investigate the explanatory power of two value‐based performance measurement models, Economic Value Added (EVA®) and shareholder value added (SVA), compared with three traditional accounting performance measures: earnings per share (EPS), return on investment (ROI), and return on equity (ROE), in explaining stock market returns in the Athens Stock Exchange (ASE).
Design/methodology/approach
The paper uses the Easton and Harris formal valuation model and employs both a relative and an incremental information content approach to examine which performance measure best explains stock market returns; and the explanatory power of the pairwise combinations of one value‐based performance measurement model and one traditional accounting performance measure in explaining stock market returns. For this purpose, pooled time‐series, cross‐sectional data of listed companies in the Athens Stock Exchange (ASE) over the period 1992‐2001 have been collected and modelled.
Findings
Relative information content tests reveal that stock market returns are more closely associated with EPS than with EVA® or other performance measures. However, incremental information content tests suggest that the pairwise combination of EVA® with EPS increases significantly the explanatory power in explaining stock market returns.
Practical implications
The results suggest that the market participants in the Greek stock market should pay additional attention to EVA® but they should also consider other determinants to develop their investment strategies.
Originality/value
The paper is one of the first studies on the value relevance of traditional accounting (EPS, ROI, and ROE) and value‐based (EVA® and SVA) performance measures in explaining stock market returns in the ASE. The results extend the understanding of the role of EVA® and SVA in explaining stock market returns in the ASE, and, moreover, whether they may affect investors' decisions in a continental European market with market characteristics similar to that of Greece.
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The purpose of this study is to investigate explanations for the behaviour of the size premium using measures of large and small stock holdings of mutual funds.
Abstract
Purpose
The purpose of this study is to investigate explanations for the behaviour of the size premium using measures of large and small stock holdings of mutual funds.
Design/methodology/approach
Returns‐based style analysis is used to measure asset class exposure by regressing equity fund returns on asset class returns over the period 1965 to 2003. The coefficients estimate portfolio asset allocation indicating a fund's investment styles. The estimates from 36‐month rolling regressions of US equity fund returns on various asset classes are aggregated and used as measures of investors' exposure to small stocks. The patterns are analyzed in the context of the behaviour of the abnormal returns to small stocks.
Findings
The results indicate the importance of the 1974‐1975 bear market to the historical size premium and support an overreaction and reversal argument. Exposure to small stocks drops dramatically between 1975 and 1977, suggesting a sell‐off of small stocks. Fund exposure subsequently increases rapidly to its highest levels between 1982 and the market crash of 1987. These patterns are consistent with pricing pressure that would lead to the initial undervaluation and subsequent overvaluation driving returns to small stocks over this period.
Originality/value
The study introduces the application of the returns‐based style analysis methodology to studying an asset‐pricing phenomenon and demonstrates important insights that can be obtained from the use of this methodology in new contexts and at an aggregate level.
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Dean A. Paxson and Arun Melmane
The purpose of this paper is to illustrate the use of a multi‐factor competitive real option model.
Abstract
Purpose
The purpose of this paper is to illustrate the use of a multi‐factor competitive real option model.
Design/methodology/approach
The model is described, context of Google‐Yahoo! is developed, market share and other parameter values are estimated, sensitivities and alternative model specifications are shown, and model results are compared with accounting and also stock market valuations and conclusion emphasizes the need for further empirical and theoretical research.
Findings
It was found that applications are feasible, but estimated parameter values are likely to be very approximate compared with internal company information. Hence it points to use as managerial decision tool. Research limitations/implications – Some limitations are the assumed duopoly model, and that historical data are adequate proxies for expected revenue, investment cost, volatilities and market share. The basic model assumes geometric Brownian motion, but the possible consequences of other stochastic processes are illustrated.
Practical implications
Internal market share information should be compared with public data in making strategic investment decisions.
Originality/value
Model adaptation and empirical application are unique, and of value to future empirical researchers, including stock market analysts as well as corporate decision makers.
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Pedro Pimpão, Antónia Correia, João Duque and José Carlos Zorrinho
– The main purpose of this work is to evaluate the long-term effectiveness of a hotel’s chain loyalty program from a behavioral perspective.
Abstract
Purpose
The main purpose of this work is to evaluate the long-term effectiveness of a hotel’s chain loyalty program from a behavioral perspective.
Design/methodology/approach
A Dirichlet model was estimated to assess purchase frequency and hotel choice within one of the biggest hotel chains in Portugal. The sample comprises hotels where a loyalty program was implemented, with a total of 176,099 reservations. Data were extracted from the customer relationship management (CRM) systems of the hotel group.
Findings
The results suggest that instead of being loyal to a certain hotel, customers are loyal to the branded hotel chain. As the hotels are all part of the branded group, this polygamy is not only accepted but also very welcome.
Research limitations/implications
The level of penetration and purchase frequency of CRM was measured. Nevertheless, a thorough understanding of these will be critical for the success of this program.
Practical implications
This research is a step toward assessing hotel chain competitiveness, by improving and suggesting segmented groups of brands/hotels and to induce cross-selling products accepting polygamous loyalty as the only way to sustain long-term relationships with customers.
Originality/value
This is one of the few research studies, if not the only one, to assess loyalty with tangible indicators, such as purchase frequency. Further, the results suggest that loyalty programs are more effective if multiple options are available and as such, cross-selling is perhaps the only way to fix customers.