Contributions in Merlin

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Online price comparison sites (shopbots) like PriceGrabber.com are the most powerful tools for consumers to easily compare prices and find offers for desired products. Besides providing distributions of actual prices in price comparison tables, shopbots like NexTag.com have recently introduced price charts (line charts) displaying a product's full price history. Price charts should support consumers in forming expectations about future prices. Nevertheless, it is currently unclear how price charts influence consumer price expectations and purchase decisions. The results of this study show that the provision of past prices leads to strong adjustments of price expectations depending on price chart characteristics. In particular, the trend, variance and range of past prices in the chart strongly affect price expectations and purchase timing decisions. Furthermore, in the case of a strong downward trend and high variance in past prices, results show that nearly 50% of the total effect is caused by the visualization of the price history.

This thesis considers sentiment in the print, TV and financial markets news media in order to evaluate if and how sentiment can explain and predict consumer and investor behavior. In the empirical section, we introduce novel and unique datasets in order to show with various models the explanatory and predictive power of media sentiment. The first chapter introduces the subject matter, sets out the methodological framework, and introduces the datasets. The second chapter tests the models of Carroll et al (1994) and Sommer (2007) by adding news sentiment to their consumption behavior equation. It is shown that Autoregressive Moving Average (ARMA) models are suited for modeling private consumption with macroeconomic and sentiment variables. The introduced news sentiment index was created from over 100,000 newspaper articles, and it is shown how such an index can be created. The third chapter takes the nowcasting approach from Kholodilin et al (2010) and Schmidt and Vosen (2011) by showing that TV sentiment is a valid variable to nowcast private consumption. The TV sentiment index was created from over 10,000 TV news shows. In the last chapter, we examine the explanatory power of sentiment from Reuters news on stock returns with Vector Autoregression (VAR) models, accounting for the findings of Tetlock (2007), Brown and Cliff (2005) as well as Menkhoff and Rebitzky (2008). In total, we consider over 3.6 million Reuters news pieces. The main results are the following: first, news sentiment is a valid variable to add to private consumption behavior models, and news sentiment has similar explanatory power than personal income. Nevertheless, consumer sentiment is the more powerful variable compared to news sentiment. Second, TV sentiment is more suited to nowcast private consumption than consumer sentiment. And third, we show that both positive and negative Reuters sentiment matter for explaining stock returns. The sentiment effect is measurable and present over several months, and not only days, as previously assumed in the literature.

Based on survey data covering 8,387 firms in 20 countries we compare the access to bank credit for firms in Eastern Europe to that in selected Western European countries. Our analysis reveals five main results. First, the firm-level determinants of the propensity to apply are similar in Eastern and Western Europe: small and financially opaque firms as well as firms with alternative financing sources are less likely to apply for credit while firms with greater financing needs (exporters) are more likely to apply. The lower rate of loan applications by firms in Eastern Europe compared to Western Europe seems to be partly driven by the stronger presence of foreign banks and the lower level of credit information sharing. Second, while those firms which do apply for credit are rarely denied credit, foreign bank presence is associated with higher loan rejection rates among small firms. The high loan approval rates observed in Eastern and Western Europe result partly from a selection effect: those firms which are more likely to have an application rejected are less likely to apply in the first place. We find evidence that foreign bank presence is associated with higher loan rejection rates among small and government-owned firms. Third, the reasons why firms do not apply for loans differ strongly between the two regions. In Eastern Europe a higher fraction of non-applicants seem to be discouraged by lending conditions, that is, high interest rates and tough collateral requirements, while in Western Europe more firms simply do not need loans. Fourth, credit constraints in Eastern Europe softened in recent years. Firms which were discouraged from applying for credit or denied credit in 2005 were more likely to have a loan in 2008 than to still be credit constrained, especially in countries with better credit information sharing. Finally, credit constraints do affect firm performance in Eastern Europe. In particular, firms which are denied credit or discouraged from applying are less likely to invest in R&D and introduce new products.