Monday, February 17, 2014

'like' if you love cheese is not dead

Thanks to those cheeky Facebook data scientists for our Monday morning chuckle of the day.

AllFacebook reports on the introduction of the 'Pages to Watch' feature available to page admins.

Essentially the feature will alert managers when a post on another page they are watching (ie competitors and suchlike) is getting large amounts of attention and engagement (sic).

This little tactic is designed to activate home bias (aka the keeping up with the joneses effect) in hapless page admins, now futher driven to distraction.

In their paper 'Keeping Up With The Joneses and the Home Bias', Lauterbach and Riesmen (2003) describe this effect as follows:

'We argue that when individuals care about their consumption relative to that of their neighbors, a home bias emerges, that is investors overweight domestic stocks in their portfolios. Domestic stocks are preferred because they also serve the objective of mimicking the economic fortunes and welfare of the investor's neighbors, countrymen, and social reference group'.

The authors conclude 'The basic idea is that if investors care about their consumption relative to that of their neighbors, they would bias their portfolios in the direction of securities correlated with their neighbors' wealth.'

Perhaps 'like if you love cheese' is not dead after all.

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