The proliferation of online targeting methods has created a confusing array of options for marketers and their ad-network partners. This report reviews and “reality checks” the leading targeting methods — including geo-locational, demographic, contextual and behavioral targeting — and evaluates how well they have lived up to their potential.
While all have their advantages, each method has shortcomings which prevent it from becoming the dominant method. Geo-locational targeting is often inaccurate and falls short when targeting travelers and Internet users at work. Demographic targeting lacks standards and, since it’s typically based on aggregated site-profile information, often misrepresents individuals visiting the site. Contextual targeting continues to mismatch ads with page content and is blind to interests, budgets and “in-market” status. Finally, behavioral targeting creates a one-dimensional view of the consumer, does not reflect ability to buy, is plagued by privacy concerns and struggles to identify when consumers are no longer “in market.”
In this paper, we compare the tendency for firms to upwardly manage earnings during good versus bad economic times. In our analysis, earnings management may be achieved by manipulating either accruals or real transactions (e.g., by decreasing discretionary expenditures such as R&D). While there are other forms of earnings managementthan earnings enhancing, such as smoothing or big bath, we focus on upward management because it is the greatest concern to both academics and practitioners. Our investigation is important, because while earnings management has been extensively studied, virtually all research has focused on firm-specific factors, and there has been a dearth of research on how earnings management varies with the state of the economy. Understanding how the tendency to boost earnings changes with macroeconomic conditions would enhance our understanding of this important phenomenon.
Based on the analysis in Conrad et al. (2002) and on relative performance evaluation of managers, we predict that firms have a greater tendency to manage earnings upward during good times. Conrad et al find that investor reaction to earnings disappointments is more adverse during good times. Thus, firms face greater incentives to avoid poor earnings when the economy is up, so they are more prone to boost earnings at such times. As Conrad et al. explain, bad news in good times has such a negative stock price impact, both because it causes investors to revise downward their assessment of the economy, and because it leads to greater uncertainty about economic conditions, resulting in higher discount rates.
The main sources of risk that an investor faces are price and volatility risk (vega risk). Price risk is the investor's exposure to changes in the asset price. Volatility risk is the exposure to changes in volatility. The latter type of risk has been responsible for the collapse of major financial institutions in the past fifteen years (e.g. Barings Bank, Long Term Capital Management).
