Jet Etihad Deal Analysis Essay

Jet-Etihad dealOn April 24 Jet Airways and Etihad signed the strategic alliance. The Etihad agrees to buy a 24% stake in the Jet for about Rs 2,060 crore. It is the biggest deal in Indian aviation area. On May 24, Jet shareholders approved the stake sale. The airline deferred its resolution to amend the attach tos articles of association. However the deal is facing hurdles with share holders and even Securities and Exchange circuit card of India (Sebi) and Foreign Investment Promotion Board (FIPB) of India raising concerns everywhere substantial rights being accorded to Etihad Airways. The FIPB has deferred granting sanction to the proposal until the field of studys regarding rig are addressed. The Jet Airways-Etihad share holder agreement is likely to be revised again pursual SEBI and FIPB concerns over substantial control to the Abu Dhabi airline under the deal. The major concern of SEBI and FIPB were-* Under the current agreement board resolutions require consent of 3/ quat ernate of members majority for decision and As per the agreement Etihad would get three board positions while Jet Airways would take a shit four members. There entrust be cardinal independents on the board. * The agreement has unilateral right and can be terminated by Etihad any time. * The jet airways headquarters exit be shifted to Abu Dhabi where it is subjected to law and control of Abu Dhabi. On May 27, the two airlines amended its shareholder agreement to address shareholder and SEBI concerns on control and ownership. The major changes were- * Etihad will not have the unilateral right to terminate the commercial cooperation agreement and this right will right away be held by both sides. * The other change pertained to constitution of the nomination committee of the board which will make key board and management appointments. The nomination committee will include one person nominated distributively by Jet Airways and Etihad and three other board members will be chosen th rough consensus. But s work the Foreign Investment Promotion Board defers approval to Jet-Etihad alliance due to More changes were being proposed to address the concerns.Imconformity on Economy, Stock Market and various other AreasThe favour of the bilateral pact point to the 1.8 million Indians who live and work in the UAE that, they can fly to India cheaply. Earlier they had to spend their yearly savings to make one trip patronise home. The latest exchange of seats with Abu Dhabi is because of Abu Dhabi has agreed to invest $50 billion in infrastructure projects in India. It will lead to growth of aviation sector and will generate employment in India. The agreement has a clause that deal can be terminated if requisite permissions are not real before July 31. However, the discussions are now on to renegotiate the terms of the deal at a price lower than that agreed upon earlier. The two airlines are now discussing changes in the investor agreement. These include a possible revisio n in purchase price. Under the agreement signed by the airlines on April 24, Jet Airways had agreed to issue 24 per penny equity to Etihad by way of preference shares in a deal valued at about Rs 2,060 crore. Etihad had agreed to a earnings a premium of 31 per cent on Jets stock price (Rs 573 at that time). The Jet stock fell four per cent from its previous close on BSE to end the day at Rs 403.45. after the FIPB decided to defer the approval of Jet-Ethiad deal. It further fell drastically and came to 369.85 till date. Impact if deal is approved by FIPBIf the deal gets green signal from the regulating authorities, their would be a positive impact on our economy. It will compress the stock of all the airlines upward especially Jet airways because it will open doors for other airlines for merger with other foreign airlines and would attract FDI which in turn will lead to growth and development of our economy. It would ease the pressure of high current account deficit in long run bec ause if more and more dollars will flow in form of FDIs in India, than rupee will appreciate in terms of dollar.

Living in 1984

George Orwells horrendous yet prophetic vision of the future in his novel, 1984 has come and gone. In this alarming novel, Oceania, where the story takes place, is the perfect depiction of Negative Utopia in which the presidential term is in total control of their citizens. They control every aspect of their life. From the smallest things as the clothes their citizen wore on a daily basis to the person they were allowed to unify to their thoughts. Freedom of choice and thought was unquestionable and was not allowed and anything or anyone that went against this principle or resisted oppression was tout ensemble suppressed themselves.Now, in 2006 under our current government there are a lot of similarities between the haunting novel of the Negative Utopia which George Orwell portrays in.. life-time in 1984-Today George Orwells horrendous yet prophetic vision of the future in his novel, 1984 has come and gone. In this nightmarish novel, Oceania, where the story takes place, is the perfect depiction of Negative Utopia in which the government is in total control of their citizens. They control every aspect of their life.From the smallest things as the clothes their citizen wore on a daily basis to the person they were allowed to marry to their thoughts. Freedom of choice and thought was unquestionable and was not allowed and anything or anyone that went against this principle or resisted oppression was completely suppressed themselves. Now, in 2006 under our current government there are a lot of similarities between the haunting novel of the Negative Utopia which George Orwell.

Breaking Through Essay

Throughout the book Breaking Through, Francisco Jinemez discusses umteen themes. This book is an interesting and a must read book for state who moving to another country and trying to describe a better life. There are three themes in the novel that one must catch in order to understand and earn a meaningful life family, work, and education. First of all, family is the first school in which a child receives the basic set of life. When Francisco was young, his family travel to America, hoping to suit a better life. He grew up in a poor family.The six members in his family are his parents, (how many? 3? ) brothers, and sister. His family suffers and struggles with many hardships because they were not coherent English speakers. His mother is a caring and thoughtful woman who places her family as an important priority. She gives Francisco a peck of advice that alleviateed him solve many of his problems. wholly the members of his family are friendly except his father. His father always yells at him and Roberto when they ask to go out. Although his mood changes invariably like the weather, they yet respect him completely.Francisco spends a lot of time with his big brother since their ages are close to each other. Franciscos love for his family is never-ending. In one part of the book, Francisco and his brother, Roberto, moved away from their family to a contrary city to live by themselves. At the beginning, Francisco misses his family so much that he cant help but reminisce about the time when they still lived together. Francisco often misses the sounds of his Papas coughing, the rattle of his aspirin bottle, and the rolling of Mamas twelve-inch lead pipe (19).Being away from his family occasionally makes Francisco think of all the little things about his life when he lived with his parents. Jimeneez illustrated an image of Franciscos life before he moved to _____ in order to demonstrate how Franciscos beefed-up ties to his family causes him to think abo ut when they were still living together. Everyone has to work whether to earn money or get experience for a better future. When Francisco was still in heart school, he supported his family by working. His work was to pick cotton, carrot, or strawberry, depending on the season.Franciscos father has trouble with his back, so he could not work as well as he did before. Things get worse when Roberto got married because he is unable to support the family anymore because he needs the money to build his give birth family. Francisco and his father become depressed as they worry for their life and survival. They often wonder how they will survive with the limited amount of money they receive from their work. invigoration is tough for them. Why do we have to go to school? It is the best option for our future. In general, achieving an education is not an easy thing to do.It is even harder for Francisco who moved to another country. Although he has problem with English, he never stop trying to learn it. In addition to getting a good education, Francisco also has to help support his family. This caused him to miss many school days. In his senior year, he hears good news from his teacher that he might be able to get a scholarship. He discusses the news with his family, but his father did not approve. Francisco could not control himself and finally talk back to his father that why cannot he get into college.Francisco felt anger swallowing him and he could not escape it (168) Francisco felt passionate about his education because it is the only hope for Francisco to escape his poor life. He believes that he must fight for it because education is not only a ladder to success, but it will also give him knowledge to become a useful soul in the future. In conclusion, Jimenez is trying to demonstrate survival and hardship through these themes. These are themes that would help us break through all the hardships in life. A better future depends on our hope and courage.

Why It Is Important to Develop Sustainable Cities?

Why it is important to develop sustainable cities? With the rapid cultivation of urbanization, there atomic number 18 an increasing number of solid problems emerging all over the world, especially in some developing countries. Therefore, if we want to live a sustainable life without destroying the natural resources and wildlife, some rough-and-ready and feasible sustainable development policies must be taken step by step from now on. Firstly, too many mountain move from unpolished areas to urban areas, along with the high growth rate and the low death rate in the cities, which has led to space and housing shortages.There is no enough manner for such a large amount people living in the cities, so poor housing conditions, such as squatter settlements and shanty towns are unavoidable. Such poorly constructive and unplanned shacks are usually lack of running water, electricity and sewage systems. Additional, people who live in the slums cannot afford to safe quality education, he althcare and social services. To solve the housing problems, one way is to improve the infrastructure and boost the employment opportunities in rural areas to inspire people to move back to countryside.Another solution is to build satellite New Towns and New Territories near the cities to disperse overcrowded people, like Hong Kong where it has made process on building the multistory blocks of flats in new settlements. Secondly, the severe pollution problems are more(prenominal) obvious in the cities than those in the countryside. Because of the emission of cars and chemical factories, air pollution has become the biggest take exception for most city governors.It is essential to follow sustainable development policies, such as encouraging mass transit and building fast and efficient conveyancing systems to find alternatives to cars. At the same time, regulations and laws are critical methods to fine or even close badly polluting factories and workshops but encourage environmenta l-friendly production activities. Lastly, there is straight big concern on exhausting of non-renewable energy resources, i. e. oil, wood, gasoline and minerals. If we overuse and overexploit such energy resources blindly, how can our next generation live?So it is an urgent issue for human beings to discover and make good use of locally available renewable energy (solar, wind and biogas etc. ), which are bonny and unlimited, but it will have so many limiting factors to make use of them, like technical financial restrictions. Overall, apparently, practical and feasible sustainable development policies are able to address most problems which come across in the process of human society developing. Therefore, it is vital and necessary to make more and more sustainable policies to keep the pace of urbanization. Word count 418 words

Service Learning Reflection

I chose to go to my home t aver to work with Kids Klub for my process learning picture. Kids Klub is a ministry of Wesley United Methodist Church offering quality before and subsequently groom c be and summer camp programs for children ages five to fourteen. The reason I chose to go to my home town for this honk is because I regularly participate in this program when I am home for breaks. While I am there I assist the children in any area in which they may exact extra help, as well as helping with preparations that need to be made for activities and field trips. This project relates to the rush of Matthew 2531-40.This passage talks about children in reference to helping each other(a) out when whizz is in need and doing the flop thing. Another passage that I would like to key is Proverbs 226. This states that a child should be raised in the way he should go, and even when he is old he will not depart from it. Kids Klub is a program that offers care to children before and af ter school. Being that it acts similarly to a daycare it gives children the opportunity to work on homework or projects they business leader need to finish, or just to consent time to interact with other children and enjoy games and activities.In addition, they are taught scripture in fun ways that they will enjoy. Being suitable to do such activities in this environment gives the children numerous opportunities to help one another. It is also great that the children are able to associate with distinct age groups they are always able to nurture each other new things and be able to ask advice from someone that they might feel more comfortable talking to since they are closer to their own age. While I was there, I acted as a teacher, or mentor, as well as a friend.It was my job to assist them with their homework, projects and to clarify what they were going over in bible classes. I also helped desexualise dinner for them and played games with them until their parents were able t o pick them up. I was also there to mediate and help the kids tell on the right decision when there were conflicts or arguments. By doing so, they are learning how they should deal with situations and what is the right or wrong way to handle them. It is really amazing to weigh this starting time hand when I see the kids oluntarily helping one another with assignments and resolving issues on their own in ways that benefit everyone touch on positively.I chose to mention Proverbs 226 because it acts as a precursor to the main passage of congeneric to this service. This passage states that a child should be raised in the way that he should go, and even when he is old he will not depart from it. I think it is important to include when relations with children because it is a top priority to teach them. Children must be taught right and wrong in the first place before they will be able to employ those tactics in their lives.It is important that they discern what it means to help one another and how much it could mean for one in need as well as the one providing the service. This is why it is important that children receive help when they are in need. The fortune that one might help another is much greater when they have been shown the same sort of attention when they were in need. Once they are shown this, it will stick with them through their lives and they will always know what is right and wrong no matter what. It is not as simple to teach what is right and wrong in this day and age, which is another reason why it is so important.Because of todays society, it has become a standard to disregard ethical motive that we should learn as children and keep with us through our lives. In todays tumultuous society, righteousness often gets brushed aside as just another part of the fairy tale, and those learning moments of our jejuneness become just another happily ever after tale that seems unbelievable by todays standards (Lebeau). I think it is equally importan t to teach values so that children are sure to be able to employ them in their lives by helping others.The main passage that I chose is Matthew 2531-41. This passage talks about treating one another right. Ultimately how we treat one another will attend whether we are saved. Its purpose is to decide whether or not one will be permitted to the eternal earth or will be consigned to eternal punishment (NIV, 2541). The King will separate the children check to whether or not they have helped others when they were in need.This, in turn, makes the obvious point that we need to be taught and to teach others hat is right or wrong and that we need to help each other, regardless of who we are we do not discriminate. This is shown in one of the verses as follows The King will reply, I tell you the truth, whatever you did for one of the least of these brothers of mine, you did for me (2540). When we do good to others, we are doing good to god. Even though we do not have to opportunity to show this directly, it is seen and is important. Both of these passages are of equal importance when addressing what is right and helping others.Children are the future of humanity, therefore it is essential that this is stressed during the early years of their lives. These situations are presented everyday in life, young and old, and it remains important through all of our years. That is why I enjoyed working with the kids and the fact that I was an influence on them. There is nothing I love more than helping children understand why we are to do what is expected. This was certainly a beneficial experience for me as well as the children and we can all run valuable information and learn from our time together.

Berkshire Hathaway Phenomenon In the Context of Modern Finance Theory Essay

Berkshire HathawayPhenomenonIn the Context of Modern pay TheorySepttember2013Berkshire Hathaway PhenomenonIn the Context of Modern Finance TheoryIntroductionOver the 46 geezerhood ending December 2012, Warren tabulatort (Berkshire Hathaway) has achieved a compound, after-tax, mark of dedicate in excess of 20% p.a. such consistent, long term, out performance might be viewed as incompatible with modern finance theory.This set close discusses the Berkshire Hathaway phenomenon in the context of modern finance theory.Part 1 Modern Portfolio TheoryBerkshire Hathaways spend strategies mainly differ with modern portfolio theory on two aspects. The frontmost sensation is the attitude towards the unwanted thing in investment. And the second unrivalled is the perspective of diversification.As Harry Markowitz pointed out in Portfolio Selection, one of the assumptions is (Markowitz, 1952)the investor does (or should) make expected re call on as a desir equal thing and variance of retu rn an unwanted thing. However, in Warren Buffets point of view, (Roberg G, 2005) the only(prenominal) undesirable thing should be the possibility of harm. He emphasizings on conducting aboriginal analysis to work out a comp whatevers hereafter profits, so as to conciliate the intrinsic value preferably of monitoring the gillyflower bells. This is beca call in the long term, the investment outcome is mainly harmed by misjudging the business value, including misjudging of inflation rate andinterest rate etc. As such, risk is defined differently between Mr Buffett and Modern Portfolio Theory one is defined by possibility of misjudging theintrinsic value of business, the other being simplified to variance of expected returns. If we consider risk as a probability statement, then whitethornbe Mr Buffetts definition is closer to the sure meaning.Also, the assumption of maximising one-period expected utility is non what Buffet focuses on in his investment strategies.(Roberg G, 200 5)In this case, Justin Industries, which was acquired by Berkshire Hathaway in 2000, can serve as a good example. During the five years precedent to the acquisition, stock cost of Justin Industries dropped by 37 percent, which should result in a huge variance of expected return. scarcely Mr Buffett saw it as a perfect opportunity to purchase a well-managed traditional business with everyplace 100 years of history. He offered a 23 percent premium over stock price at the time, and the stock price shot up by 22% on the day of announcement.It is as well stated by Markowitz that, (Markowitz, 1952)a rule of behaviour which does not imply the choiceity of diversification must(prenominal) be rejected both as a guesswork and as a maxim. On the contrary, Mr Buffett has his famous quote, (Roberg G, 2005)diversification serves as a protection against ignorance. If you want to make sure that nothing distressing happens to you relative to the market, you should own everything. in that r espect is nothing wrong with that. Its a perfectly sound lift for somebody who doesnt know how to analyse business.One can always argue that Berkshire Hathaway does not operate in only one industry, and they tend to invest in more industries in juvenile years. But as the business grows in volume, it is campaignable to be involved in new industries when thither are few sound investment opportunities in the industries they already operate in, let alone that the engineering industry was rarely in the list of holdings of Berkshire Hathaway, not even when Apples stock was soaring. The reason being, (Roberg G, 2005)investmentsuccess is not about how much you know but how realistically you define what you striket know.Chart 1 (Martin & Puthenpurackal, 2007)Distribution of Berkshire Hathaway investments by IndustryThe chart above shows diffusion of Berkshire Hathaways investments by industry and firm size during the time frame 1976-2006. Judging by the size and number of investments, it can be concluded that a Brobdingnagian amount of wealth was placed in manu accompanimenturing industry during the 30 years in study, although for diversification purpose, more weight could have been placed in the industry of agriculture, forestry and fishing, construction or retail trade.Having compared the differences, it is still worth noting that Markowitz did not rule out fundamental analysis in portfolio selection process, as is said in his foregoing story,(Markowitz, 1952)the process of selecting a portfolio may be divided into two comprises. The first stage starts with observation and experience and ends with beliefs about the future performances of open securities. The second stage starts with relevant beliefs about future performances and ends with the choice of portfolio. This paper is concerned with the second stage.Part 2 Efficient commercialize HypothesisThe strong form of effective market hypothesis states that all discipline, no matter public or private, inst antaneously affects current stock price. Semi-strong form is only concerned with public information, while the weak form suggests that current stock price reflects information in the previous prices. In short, they simply imply that in the long run, no one should be able to beat the market in terms of investment return.As is said in Famas paper in 1970, (Eugene F, 1970)the shew in support of the efficient markets type is extensive, and (somewhat uniquely in economics) contradictory evidence is sparse. However, Warren Buffet has always criticised efficient market hypothesis as much as he could. The majorreason is that, as a fundamental analysis advocate, (Roberg G, 2005)he thinks analysing all available information make an analyst at advantage. He once said, (Banchuenvijit, 2006)investing in a market where bulk believe in efficiency is like playing bridge with someone who has been told it does not do every good to look at the cards. Also in his speech at Columbia University in 198 4, he mentioned, ships forget sail around the world but the Flat Earth Society depart flourish. There will continue to be wide discrepancies between price and value in the marketplace, and those who read their whole wheat flour & Dodd will continue to prosper.(Roberg G, 2005)To illustrate, we can take Berkshire Hathaways acquisition of Burlington Northern Santa Fe Corp. in 2009 for example. At the time, shares of Burlington Northern had dropped 13 percent in 12 months. Also, the market was soft during GFC, so the possibility of rivalrous bids was low according to Tony Russo, a partner at Gardner Russo & Gardner, which holds Berkshire shares. If efficient market hypothesis does stand, the market would muster up quickly when GFC took place, and such opportunity of relatively low-priced acquisition would not exist. Even if it exists, other investor should presage quick upward adjustment of price and participate in bidding when they find out about this opportunity.However, this doe s not prove that fundamental analysis is superior, because intrinsic value is not yet clear defined, and how does Mr Buffet calculate the intrinsic value is still a mystery.Part 3 jacket crown plus price ModelWhen examining assumptions of Capital addition price Model, it is obvious that Mr Buffett is at odds with almost every one of them.Firstly, the model assumes that all investors are Markowitz efficient, but as mentioned earlier, Mr Buffett does not treat variance of expected return as an absolute drawback, so the second rule that Markowitz Efficiency must follow does not stand.Secondly, the model is backed by the assumption that investors havehomogeneous expectations and equal access to opportunities, which suggests that everyone is supposed to have the akin view of future profit stream. However, as a recent paper pointed out, (Frazzini, et al., 2013)Mr Buffetts return is by and large due to his selection of stocks. If everyone has the same view with Mr Buffett and the same a ccess to the investment opportunities, then if not everyone, a large number of people should be as rich as Mr Buffett, when the reality is the opposite. So Mr Buffett would not agree with this assumption either.The third assumption is that capital markets are in equilibrium, which is practically what only efficient markets can achieve, which, as discussed above, is not in line with Mr Buffetts view point.The final one, which is that Capital Asset Pricing Model only works within one period time horizon, is apparently against Mr Buffetts long-term holding strategy.Apart from model assumptions, one of the strongest contradictions between Mr Buffetts view point and Capital Asset Pricing Model is that the model is for short-term predictingpurpose, which would clearly be categorised into (Roberg G, 2005)speculation instead of investment by Mr Buffett. In addition, market portfolio is not of practical use, compared with Mr Buffetts way of only analysing businesses he is familiar with, beca use the market portfolio we use cannot truly represent the entire market.Part 4 Multi-factor Pricing Models contradictory Capital Asset Pricing Model, which has only one factor, in Multi-factor Pricing Models, such as merchandise Pricing Theory and Fama-French three-factor model, the rate of return is linked to several factors.As diversification is still suggested by the model, the same divergence on diversification exists with Mr Buffets strategies and Multi-factor PricingModels.Moreover, differences also lie in the fact that multi-factor models usually take in some macroeconomic factors, which investors should not consider according to Mr Buffett, (Roberg G, 2005)the precept being that if a single stock price cannot be predicted, the overall economic condition would be more difficult to predict.Despite the differences, some micro factors included in the multi-factor model, such as P/E ratio and book-to-market ratio, can also be used to conduct fundamental analysis to determine t he intrinsic value and possibility of growth of a business. As such, the ideas of which factors to take into account can accord within the two different approaches.Chart 2(Martin & Puthenpurackal, 2007)Factor Regressions of Berkshire Hathaway and Mimicking PortfoliosIn a paper by Gerald S. Martin and basin Puthenpurackal, they conduct a regression analysis using Fama-French three-factor and Carhart four-factor models on monthly returns of Berkshire Hathaway and mimicking portfolios. (Martin & Puthenpurackal, 2007)The adjusted excess returns turn out to be significant with p-values 0.024 the excess market return and high-minus-low book-to-market factors are again significant with p-values 0.01. However, small-minus-big and prior 2-12 month return momentum factors are not significantly explanatory factors.As such, preliminary induction can be reached that book-to-value highminus-low can be a commonality factor in both multi-factor models and Mr Buffetts fundamental analysis. In addition, the factors of firm size and momentum are not likely to be considered by Mr Buffett. Also, both Berkshires and mimicking portfolios returns outperform the multi-factor models in study. (Bowen & Rajgopal, 2009)But as is pointed out in another thesis, the superior performance is attributed to the earlier years and they observe no significant alpha during the recent decade.Part 5 Black-Scholes Option Pricing ModelAccording to Berkshire Hathaways letter to shareholders in 2008,(Buffett, 2008)their put contracts reported a mark-to-market loss of $5.1 billion, and this led to Mr Buffetts criticism towards the Black-Scholes formula as is claimed by the media.However, the loss was in fact caused by inclusion of volatility in the formula when volatility becomes irrelevant as the duration onwards adulthood lengthens. As Mr Buffett said in the letter,(Buffett, 2008)if the formula is applied to extended time periods, it can take in absurd results. In fairness, Black and Scholes alm ost certainly understood this point well. But their devoted following may be ignoring whatever caveats the two men attached when they first unveiled the formula. As such, Mr Buffetts comment on Black-Scholes formula is more of self-criticism than the other way around.This is reflected in his earlier comment on performance in the letter,(Buffett, 2008)I believe each contract we own was mispriced at inception, sometimes dramatically so. I both initiated these positions and monitor them, a set of responsibilities consistent with my belief that the CEO of any large financial organization must be the Chief Risk Officer as well. If we lose cash on our derivatives, it will be my fault.We can understand why Mr Buffett gave this fair comment about the formulae when referring to the Black-Scholes paper,(Black & Scholes, 1973)if the finish date of the option is very far in the future, then the price of the bond that pays the exercise price on the maturity date will be very low, and the value of the option will be approximately equal to the price of the stock. Mr Buffett also commented that (Buffett, 2008)The Black-Scholes formula has approached the status of holy writ in finance, and we use it when valuing our equity put options for financial statements purposes. Key inputs to the calculation include a contracts maturityand strike price, as well as the analysts expectations for volatility, interest rates and dividends and that even so, we will continue to useBlack-Scholes when we are estimating our financial-statement liability for long-term equity puts. The formula represents conventional wisdom and any substitute that I might offer would engender extreme scepticism.Despite Mr Buffetts confession, a scholar studied the letter and reached a different conclusion why the loss was made(Cornell, 2009)He first ruled out risk-free rate, inflation rate and drift and focused on volatility, which is consistent with where Mr Buffett image he made a mistake. The lognormal diffus ion assumption, which implies that volatility increases linearly with respect to the horizon over which it is measured, was discussed at length with controversial evidence. As such, its misuse is not a strong explanation regarding the absurd results.He then found out in the letter that Mr Buffett believed that inflationary policies of governments and central banks will limit future declines in nominal stock prices compared with those predicted by a historically estimated lognormal distribution. If Mr Buffet is right, then the Black-Scholes model will indeed significantly overvalue long-dated put options, to which a possible solution is making the leftfield tail truncated to reduce the value of long-dated put options.SummaryThroughout this essay, we have discussed the common views and divergences between Mr Buffetts investment strategies and Modern Finance Theories. Now we summarize the main points as follows crude viewsDivergencesBlack-Scholes Option Pricing ModelModern Portfolio T heoryEfficient Market HypothesisCapital Asset Pricing ModelMulti-factor ModelsChart 3Common Views and Divergences between Modern Finance Theory andMr Buffetts StrategiesModern Finance TheoriesModern Portfolio TheoryDivergences with Warren Buffet1. Risk Defined as excitability2. Short Investment Horizon3. DiversificationEfficient Market HypothesisCapital Asset Pricing ModelReliability of Fundamental Analysis1. Markowitz Efficient Investors2. Homogeneous Expectation andEqual Access to Opportunities3. Markets in Equilibrium4. Short Investment Horizon5. Predicting Function Leads toSpeculation6. Impractical Market Portfolio7. DiversificationMulti-factor Models1. macro instruction Factors2. DiversificationChart 4Detailed Divergences between Modern Finance Theory and Mr Buffetts StrategiesBibliographyBanchuenvijit, W., 2006. Investment Philosophy of Warren E. Buffet, Bankok The University of Thai Chamber ofCommerce.Black, F. & Scholes, M., 1973. The Pricing of Options and Corporate Liabil ities. The Journal of Political Economy, 81(3), pp. 637-654.Bowen, R. M. & Rajgopal, S., 2009. Do flop Investors Influence Accounting, Governance and Investing Decisions?, Washington D.C. University of Washington.Buffett, W. E., 2008. Letter to Shareholders, Omaha Berkshire Hathaway, Inc..Cornell, B., 2009. Warren Buffet, Black-Scholes and the Valuation of Long-dated Options, Pasadena California build of Technology.Davis, J., 1991. Lessons from Omaha an Analysis of the Investment Methodsand Business Philosophy of Warren Buffett, Cambridge Cambridge University.Eugene F, F., 1970. Efficient Capital Markets A Review of guess and Empirical Work. The Journal of Finance, 25(2), pp. 383-417.Eugene F, F. & Kenneth R, F., 1992. The Cross-Section of Expected Stock Return. The Journal of Finance, XLVII(2).Markowitz, H., 1952. Portfolio Selection. The Journal of Finance, VII(1), pp. 77-91.Martin, G. S. & Puthenpurackal, J., 2007. Imitation is the Sincerest Form of sycophancy Warren Buffett and Berkshire Hathaway, Reno University of Nevada.Roberg G, H., 2005. The Warren Buffet Way. 2 ed. Hoboken John Wiley& Sons, Inc..William F, S., 1964. Capital Asset Prices A Theory of Market Equilibrium under Conditions of Risk. The Journal of Finance, 19(3), pp. 425-442.

Effects of Television Commercial Repetition

ledger of Con summing uper research, Inc. The effect of Television Commercial repeating on cognitive Response and put across Acceptance Author(s) George E. Belch Reviewed escape(s) line of descent ledger of Consumer Research, Vol. 9, No. 1 (Jun. , 1982), pp. 56-65 Published by The University of Chicago straighten come to the fore Stable URL http//www. jstor. org/stable/2488937 . Accessed 17/08/2012 0648 Your social occasion of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, functional at . http//www. jstor. org/page/info/ around/policies/terms. jsp .JSTOR is a non-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide cooking stove of content in a trusted digital archive. We use information technology and tools to accession harvest-festivaliveness and comfort sassy-make forms of scholarship. For more than than information about JSTOR, please contact emailprotected org. . The University of Chicago Press and ledger of Consumer Research, Inc. be collabo valuation with JSTOR to digitize, pre be go through and extend access to Journal of Consumer Research. http//www. jstor. org The Television Commercial repeat on Cognitive Response and Message Acceptance effectuate ofGEORGEE. BELCH* The cognitive make of advertising repeatare dated by consideringthe jounceof troika levels of TV commercial meaning characterisation withina one and simply(a)-hour schedule. military capabilitysand purchase innovationswere not affected by communicate repeating, although cognitive rejoinders became more veto as characterization frequencyincrease. The on the wholeiance among cognitive repartees and the kernel acceptance measures was relatively constantacross the three film levels. set up of repeated pic to a glib-tongued colloquy form long been of interest to social psychologists and marketers.However, research concerning the cause of convincing communicate repeat on cognitive processes has been limited in twain social psychology and marketing. In social psychology, untold of the repeat researchhas been per makein contexts thatdo not involve communication. For example, Zajoncs (1968) theory of mere impression suggests that a persons billet toward a excitant is positively relatedto exposure frequency(an effect Zajonc attributedto the pleasantness associated with hearing an increasinglyfamiliar arousal).However, mere exposure theory may learn limited relevance to the attitudinal effects of persuasive nub repeat,as this model applies primarilyto round-eyed nonassociative stimuli, such as nonsense syllables or Turkish alphabet characters. Persuasive centers tend to be more complex stimuli and, in the case of advertisingmessages, the focus on is generally on objects or ideas presentedin the message ratherthan on the advertisementitself. With the exception of a record by Cacioppo and petty(prenominal) (1979), the cognitive and emotive effects of repeated exposure to persuasive communications ease up generatedsurprisinglylittle researchin social psychology.Attemptsto determinethe effects of advertisingmessage repetition pose appearedfrequentlyin the marketingliterature (Craig, Sternthal, and Leavitt 1976 Grass and Wal- The empale 1969 Mitchell and Olson 1977 Ray and Sawyer 1971 Sawyer 1973 Silk and Vavra 1974 Winter 1973). However, most researchinto the effects of advertisingrepetition has foc apply primarilyon outcome measuressuch as ring, attitude,and purchase target,ratherthanconsideringthe underlie processes that might shape and determine reaction to an advertisingmessage following multiple exposures. trance knowledge of the repetition function for a persuasivemessage with respect to these outcome variables is important, the cognitive effects of message repetition must excessively be consideredif brain wave is to be gained in understandinga recipientsreactionsto a message following multiple expos ures. The purpose of this investigation is to study the effects of repeated exposure to a persuasive communication by examining the impact of boob tube commercial repetition on cognitive touch on.Cognitive receipt measures (Greenwald 1968 superficial, Ostrom, and Brock 1981 Wright 1973) as well as traditionaloutcome measures such as recall, attitude, and purchase intention are utilise to examine the effects of multiple message exposures on recipients. This study to a fault examines changes in the relationship of cognitive solvent mediators to measures of message acceptanceresultingfrom multipleexposuresto a commercial message. RELEVANT LITERATURE *George E. Belch is AssistantProfessorof Marketing,College of profession Administration,San Diego State University, San Diego, CA 92182.The author wishes to acknowledge the financial shop provided by a doctoraldissertationgrant from the AmericanMarketingAssociation and by researchgrantsfrom the MarketingScience Instituteand the Univ ersity of California, Los Angeles. Appreciationis in like manner expressed to Rich Lutz and throng Bettmanfor their comments on an earlierversion of this manuscript and to devil anonymousreviewers for their insightful comments and recommendations. The effects of advertising repetition on outcome measures such as attitude and purchase intention shake up been examined in a numberof studies.Winter(1973) name that exposure to the commercials change magnituded the distance among attitudes toward the advertised distinguish and the ideal brand. However, diminishingreturnswere implant, since the grea try outamountof attitudechange occurredduringthe first two exposures. Also, exposure had a significanteffect barely on individualsinitially unfamiliarwith the advertisedbrand 56 ? JOURNAL OF CONSUMERRESEARCH* Vol. 9 0 June 1982 EFFECTSOF TV COMMERCIAL repeating and it was positively related to brand familiarity for the relatively new brandonly. Ginter(1974) found that either boilersui t attitude change nor brand choice was affected by the numberof message exposures. Null effects of advertising repetition were as well found in a study by Mitchell and Olson (1977) repetition of two types of print ads had no effect on belief strength, attitude, or purchaseintention. Several studies declare examined the effects of multiple exposure in conjunction with varied advertising appeals. Ray and Sawyer (1971) found that repetitionof six soft-sell nongrabber advertisementsproduced increases in purchase intention, while intention was not increasedby repetition of hard-sell grabber ads.Similar results were found in-a study by Silk and Vavra (1974), who examined reactions to hard-sell and soft-sell radio commercials. Gorn and Goldberg (1980) examined the effects of repeated commercialexposure on eight- to ten-year-oldboys by change the numberof commercials seen in the context of a half-hourprogram. Subjects viewed the commercials eitherone, three, or five magazines. However, some of the multiple-exposure condition subjects viewed the same commercialrepeatedly,while differentssaw a differentcommercial for the new brand apiece quantify.Gorn and Goldbergfound that moderateexposure (threerepetitions)resultedin the advancedest level of brandpreference, providedthat the same commercial was not seen each eon. 57 Cacioppoand Petty (1980) well-tried the viability of the twostage cognitive response model in two other repetitionexperiments. In the first experiment, the cognitive response measureand a persistingmeasureof attitudechange (taken one week later) were affected in the curvilinear manner suggested by the two-factor model.In the blink of an eye experiment, they predicted-and found-an interactionbetween exposure frequency and the genius of the arguments utilise on a persisting attitudechange measure. Strong argumentbased messages became more persuasive with repetition weak argumentmessages became less persuasivewith repetition and novel messages bec ame more, then less persuasive with repeatedexposure. Calder and Sternthal (1980) measured cognitive responses after commercials for two outputsone point of intersection and was unfamiliarto the participants one was well known.They found that increased frequency of exposure led primarilyto more total thoughtsfor the unfamiliarproductand to an increasein banish thoughtsfor the well-knownproduct. TheoreticalAccounts of RepetitionEffects time several suppositionalexplanations excite been offered for repetitioneffects, the one that appearsto be most congenial for advertisingmessage repetition is some form of Berlynes (1970) two-factor theory. Berlyne proposed a nonmonotonic inverted U-curve relationship between familiarity and liking.According to Berlyne, two separate and opposing psychological processes, positive colony and ennui, operatesimultaneously. Positive habituationis connatural to a reduction in response competition exposure results in a reductionin arousaldue to uncer taintyand conflict and olibanum increases liking. Tedium also increases with exposure and results in a less pleasurablefeeling toward the stimulus. Berlyne suggests that the relative strengthof each factorvaries as a functionof exposureto the stimulus, with the habituationprocess having the greaterimpact on affect initially, while tedium and disliking occur at higher exposure levels.Stimulus complexity and sequence heterogeneity slow the positive habituationprocess thus tedium occurs at higher exposurelevels for complex, variedstimuli and at a relatively low frequency for wide, nonvaried stimuli. An extension of Berlynes two-factor theory was proposed by Stang (1973, 1975), who take ond that repeated to exposureprovidesmore luck learnaboutthe stimulus and that because this learning is rewarding, positive affect results. However, continued repetition beyond that necessary for initial learningleads to boredomor satiety, and repeated exposure ultimately produces forbid affect tow ard the stimulus.A similar explanationfor repetitioneffects was proposed by Cacioppo and Pettys (1979) two-stage attitudemodification model. They argue that repetition of the message to providesrecipientswith more opportunity elaboratecognitively upon message content and to realize the thriving implicationsand cogency of the argumentsused in the mes- Repetition and Cognitive Response McCullough and Ostrom(1974) examined the effects of repeatedexposure by having subjects view five similar ads that used the same basic appeal, but differed in the value and phrasing of the message arguments.Cognitive responses were measuredim interruptlyafter each exposure to the advertisements. They found that repetition resulted in a significantpositive effect on cognitive response activity, as subjectslisted more positive thoughtsand fewer negative thoughts with repeatedexposure. Cacioppo and Petty (1979) examined the effects of repeating messages that were either consistent with or contraryto reci pients initial attitudeon cognitive response activity. They found that agreementwith the message position increased and then decreased as exposure frequency increased.The cognitive response patternfollowed a similar curvilinear relationship as favorable thoughts evinceed an increase followed by a decrease, while counterarguments showed a significant decrease followed by an increase. Analysis of the cognitive response measures also revealed that the counter-attitudinal message evoked a greaternumber of topic-relevantthoughts and fewer neutralor remote thoughts than the proattitudinal message. Cacioppo and Petty interpretedthese results in terms of a two-stage attitudemodificationprocess.Accordingto this model, repetitionof the message providesmore opportunity for cognitive elaborationupon the specific argumentsand realizationof theirfavorableimplications. At high exposure levels, however, tedium and/orreactancelead to an attack against the message by the receiver. 58 sage. However, in the high exposure conditions, it is really likely that tedium and/orreactance bequeath develop, leading to a decline in affect. Sawyer (1981) has suggested that Berlynes two-factor theory is consistent with results concerning the repetition effects of advertising.Sawyer suggests that advertisements and other persuasive messages in contexts of obvious manipulative intent may elicit a majority of defensive responses-such as counterarguments and source derogations-at the outset. Once expressed, these defensive responses may dissipate and allow other, more objective valuations and associations to occur. However, high exposure levels would ultimately result in satiation and negative reactionsto the message.The first hesitation of interest is whetherthe inverted Ucurve predictions offered by Berlynes two-factor theory and Cacioppo and Pettys two-stage attitude modification process model occur with multipleexposuresto a television commercial. Most of the studies extant have only exa mined outcome measures of effectiveness, providinglittle insight into the cognitive processing that underliesthese reactions. The studies that have utilized cognitive response measures have produceddivergent results, primarilybecause of the methodologicaland proceduraldifferences among them.It will be difficult to arrive at each(prenominal) generalizationsconcerning the effects of persuasive message repetition on cognitive processing until more empiricalevidence is produced. The firsthypothesisto be tested in this studyconcernsthe effects of commercialmessage repetitionon cognitive responseand message acceptance Hi The favorabilityof message acceptanceand cognitive responses to a television commercial increases with moderate levels of exposure, then declines following high levels of exposure. THEJOURNAL CONSUMER OF RESEARCH curring during the first few exposures to it.Krugmans (1972) notion of only three message exposures being sufficient to stimulatea buying decision is relevanth ere. According to Krugman, the very first exposure (defined as unquestionableattentionby the consumer)is dominatedby a What is it? type of response, whereby the message recipient attemptsto define and understandthe advertisingstimulus and to determine whether the message is of any use or interest. Krugmansuggests that much of the needed reduction in response competition occurs during this first exposure and that the arcminute exposureevokes a more evaluative and personal What of it? reaction, which determinesthe messages ultimate ability to persuade. If any blind drunkingful response occurred earlier, the one-third exposure then acts mostly as a reminderto the recipient. The third exposure is also the beginning of insulation or withdrawalof attentionfrom the task. Krugmansuggests that more than three exposures to a message essentially repeat earlier exposure effects. While no direct test of Krugmans conjecturehas been conducted, there is indirect evidence that is relevant.A st udy by Krugman(1968) of eye effort explorationof print ads indicated that peak effectiveness occurred after two or three exposures, while Grass and Wallaces (1969) work with CONPADD response indicatedthat from two to 1 four exposures are optimal. Otherevidence consistentwith Krugmans notion comes from a study by Goldberg and Gorn (1974). Also, Cacioppo and Pettys (1979) finding that topic-irrelevant ideation increased as exposure frequency increasedsuggests that the importantprocessing of a message takes place during initial exposures. This review suggests that the strengthof the relationship between cognitive responses and message cceptancemeasuresshould increasefrom low to moderateexposurelevels, since more detailed and evaluativeprocessing will occur as message recipients become familiar with the commercial message. At higher exposure levels, however, the tedium and/or reactance associated with message satiation would inhibit and/or interfere with subsequent informationprocessi ng activity and resultin a weakeningof the relationship between cognitive response and message acceptance. Cognitive processing at higher levels of exposure may consist ideationmore thanof relevantprocessing of topic-irrelevant and evaluation of the message arguments.The following predictionsconcerningthe effects of television commercial message repetition on the relevancy and mediatingrole of cognitive responses will be examined H2 The frequency of topic-irrelevant ideation increases as exposure to a television commercial increases. CONPADD (ConjugatelyProgrammedAnalysis of Advertising)measures attentionto commercialsby using an operantconditioningprocedure whereby subjects operate either a foot or hand device in orderto receive the video and audio portionsof an advertisement.The subjectseffort thus becomes a measure of interest and attentionto the message in either the audio or video mode. Effects of Repetition on the MediatingRole of Cognitive Response Also of concern in this stu dy are the effects of message repetitionon the mediating relationshipbetween cognitive responses and message acceptance. The issue of interest here is whethercognitive responseselicited afterhigh levels of message exposure mediate affective reactionto the message. Most studies of repetition effects have focused on dependentmeasures, such as recall, attitude, and purchase intention.In these studies, the cumulativeeffects thatresult from repeatedexposure to the message may be capturedby using these outcome measures. However, this may not be the case for cognitive response measures. The detailed processingthat truly determinesthe message recipientsreactionto the message may take place duringinitial exposure to the advertisement. Theorizingconsistent with this position has been offered by several researchers. For example, Leavitt (1974) has suggested a strong effects hypothesis, which suggests that the effectiveness of an ad depends on the events oc-EFFECTSOF TV COMMERCIAL REPETITION H3 The strength of the relationshipbetween cognitive response and message acceptance measures increases with moderatelevels of exposure, then decreases at high levels of exposure. 59 thoughts. 3After completingthe cognitive responsetask, the subjectswere asked to complete a programevaluationform and a set of postmeasuresconcerning issues dealt with in the program. After completing these measures, subjectswere asked to respondto dependentmeasuresconcerningmessage acceptance and reception.Two dependentmeasures of message acceptancewere used in this study attitudestoward using the new brandof toothpasteand purchaseintentionsfor the new brand. Subjects attitudeswere measuredon four semantic differential coefficientscales (good-bad, wise-foolish, favorable-unfavorable,beneficial-harmful). Subjects responses to the four scales were averaged to arrive at the attitude score used in the analyses. Intentionto try the new brand of toothpaste was measuredon three semantic differential scales (li kely-unlikely, probable-improbable, feasibleimpossible). The purchase intention measure used in the analyses was calculated by averagingthe three scales.Two measuresof message receptionwere employed. An unaidedrecall measurewas takenby askingthe respondents to carry through down as much as they could rememberaboutwhat was said in the commercial. The recall score was then formed by counting the number of correct claims for the productlisted by the subject. The aided recall measureconsisted of six multiple-choicequestions aboutspecific points in the commercial. method acting Overview The data for this study were collected as part of a laboratoryexperimentexaminingthe effects of advertisingmessage grammatical construction and repetition on cognitive response and message acceptance(Belch 1981). A 2 x 2 x 3 betweensubjectsdesign was used with type of message (comparative or noncomparative), message-sidedness (one- or twosided), and repetition(one, three, or five exposures) as the fact ors. Commercialsfor a new, fictitious brandof toothpaste were produced to serve as message stimuli for the study. The basic text for the four commercialsis shown in the Appendix. The data used to test the repetitionhypotheseswere compiled by combiningthe resultsfor the four treatment groups at each of the three exposure levels. in that respect were no significant interactionsbetween the message structure factorsand exposure frequencyfor the dependentvariablesof interest. Subjects and Procedure The sample consisted of 260 persons recruitedfrom two churchgroups in the Los Angeles area. Data collection was spread over 10 evenings during a two-week period. Upon arrival at the research setting, the subjects were given a brief statementconcerningthe reasonfor theirpresenceand were then randomly assign to one of the three experimental treatments being used during that session.One hundred subjects were assigned to both the one- and the three-exposureconditions, while 60 subjectswere assign ed to the five-exposurecondition. The smaller cell size in the five-exposure condition was due to cost limitations in attaining additionalsubjects. were readto the subjectsinformingthem that instruction manual they were participatingin a researchprojectevaluatingthe content of television programmingand that they would be asked to evaluate an episode of Quincy. The subjects were also told they would be asked questions about the commercials.The subjects finish the set of premeasures, which included demographicquestions, a television viewing profile, and premeasuresconcerning issues dealt with in the programthe one-hourprogramcontainingthe stimulus commercial(s) was then shown. Immediatelyafter the program ended, the subjects were read the cognitive response instructionsand were given two minutesto list their Categorizationof Cognitive Responses The cognitive response classificationscheme used in this study included three categories of thoughts product/mesevaluations,and sage-related evaluations,repetition-related evaluairrelevant thoughts.The product/message-related tions included the cognitive response categories of counterargument, supportargument,source derogation,and curiosity thoughts as defined by Wright (1973), as well as the categories of simple dissaffirmationsand simple affirmations describedby Beaber (1975). An additionalcategory, source bolstering, was also used. This categorizationis the of positive counterpart source derogation. evaluations included any thought that Repetition-related addressedthe fact that the commercialwas seen more than one time in the program.The use of the repetition-related categorizationmay be useful in analyzing message recipients reactionto multiple message exposures duringa short time period, such as a one-hourprogram. Other studies of repetitionandcognitive response(CacioppoandPetty 1979 Calderand Sternthal1980 McCulloughand Ostrom 1974) have not distinguishedthoughts reflecting reactions to the message per se from tho ughtsthat might be relatedto multiple exposures to the same message.The final cognitive response category was the irrelevantcategory, which in3The cognitive response instructionsused in this study requested the subjects to list the thoughtsthat occurredto them while viewing the commercial about the product and their reactions during the commercial to what was said about the productby the advertiser. 2A complete descriptionof the method employed in this study is available elsewhere (Belch 1981). In the interest of brevity, only a summary will be presentedhere. 60 cluded those statements that did not reflect any relevant evaluation of the advertisingmessage or of the advertisement itself.A three-judgepanel was used to code the cognitive response protocols. The judges were given operationaldefinitions of the three response categories and were trainedin the applicationof these definitions until each had a good of understanding the coding scheme and coding task. The basis for the final r ating of each cognition was a modal ratingof the threejudges. Interjudge reliabilities,calculated for each response category separately,rangedfrom 0. 69 to 0. 95. THEJOURNAL CONSUMER OF RESEARCH body-build AND NEGATIVE MEANNUMBERS POSITIVE OF COGNITIVE RESPONSESFOR EACHlevel REPETITION OF 2 (1. 77) Total Negative 1. 5 (1. 32) (1. 04) Total return/Message (1. 15) Related Negative 1 (. 96) Total Positive RESULTS The first hypothesis concerns the effects of commercial message repetitionon the message acceptancemeasuresof attitude and purchase intention and on the cognitive response measures. The mean attitudinal get ahead for the one-, three-, and five-exposureconditions were 3. 87, 4. 11, and 3. 77, while the mean purchaseintentionscores were 3. 24, 3. 60, and 3. 33. An analysis of sport performedon the message acceptancemeasures showed no significanteffect of repetition for either attitude or purchase intention, F (2,257) = 1. 6 and 0. 89, respectively. The means for the numberof favorableand unfavorable thoughtsgeneratedby subjectsin each of the threeexposure conditions are graphedin the Figure. 4 An analysis of variance revealed that the increase in the numberof negative thoughts across the three levels of repetitionis significant, F (2,257) = 9. 93, p < 0. 001. Pairwisecomparisons,using a Scheffe test, indicated that the difference in negative thoughts was not significant between the one- and threeexposureconditions, but was significantbetween the threeand five-exposure conditions (p < 0. 5). The Figure also shows that favorablethoughtsremainedrelatively constant across the three exposure levels. An analysis of variance for the favorable thoughts measure was nonsignificant,F (2,257) = 0. 69. The resultspresentedabove are not supportiveof the first hypothesis. The message acceptancemeasures(attitudeand purchase intention) did not show the inverted U-curve relationshippredictedby Berlynes (1970) two-factortheory and Cacioppo and Pettys two-stage attitu de modification model.The cognitive response results also fail to support the first hypothesis because negative thoughts increased across the three levels of exposure, while positive thoughts remainedrelatively constant. One possible explanationfor the increase in the number of negative thoughts across the three levels of repetitionis that multiple exposures to the message within the one-hour programmay have resultedin satiationandthe development The favorable and unfavorable thoughts measures were derived by combining those cognitive responses that were positive and negative in valence, respectively.Thus, favorable thoughts representthe sum of all source bolstering, support arguments, and simple affirmations. Unfavorable thoughts representthe sum of all counterarguments, source derogations, simple disaffirmations,and repetition-related negative comments. l .v. 3 ( 53) (. 63) (. 63) I 0 I ,I 1 5 NUMBER OF EXPOSURES 3 of reactanceby the subjects. This negative reactionto message repe tition could be expressed through negative repecontition-related thoughtson the partof multiple-exposure dition subjects.To determinewhether the increase in negative thoughts across the three levels of repetition was due to the repetition-relatedthoughts produced by the message recipients, these responses were omitted from the composite of unfavorableresponses and the effect of repetitionon the number of product/message-related negative thoughts was examined. The means for the numberof negative product/message-relatedthoughtsare graphedin the Figure. A one-way analysis of variancerevealed that these differences in negative product/message-related thoughts were not significant, F (2,257) = 0. 5. Thus, the increase in negative thoughtsacross the three exposure levels was due primarily to the recipients negative reactions to message repetition, ratherthan to negative evaluations of message content. Hypothesis two concerns the effect of multiple message exposure on the generation of top ic-irrelevant thoughts. Topic-irrelevantthoughts were defined as those responses that do not represent an evaluation of the message arguments or of the advertisementitself. The mean numberof irrelevantthoughts for the one-, three-, and five-exposure levels was 0. 53, 0. 34 and 0. 3, respectively. The differences in irrelevantthoughtsacross the threeexposurelevels were not significant, F (2. 257) = 1. 99. Contraryto the second hypothesis, it appearsthat message recipientsin the conditions did remainactive in attending multiple-exposure to the commercials, ratherthan tuning them out and producing cognitions that were unrelatedto the message. Relationshipof Cognitive Response to Message Acceptance To examine the relationshipof the cognitive responses generatedby subjects at the various exposure levels to attitude and purchase intention, several compensatoryEFFECTS OF TV COMMERCIALREPETITION parryI RELATIONSHIPOF COGNITIVERESPONSE AND MESSAGE RETENTION MEASURES TO MESSAGE ACCEPTANCE BY EXPOSURE LEVEL Single exposure side mildew 1 Purchase intention Three exposure Attitude Purchase intention Five exposure Attitude 61 Purchase intention Y2(SA+SB+SAf) Y. (CA SD + SDf) + Model 2 .327b .323b .481 b ,345b .491 b .236c Y2(SA+SB+SAf+RRP) Y. (CA. + + SDf+ RRN)8 SD Retention Aided recall Unaided recall .327b .323b .468b ,339b .522b .258c . 021 . 086 .065 . 129 .014 . 010 .028 . 159 .001 . 121 .009 . 081 SAf = honest AffirmationsSDf = Simple Disaffirmations RRP = Repetition Related Positive RRN = Repetition Related Negative SA = Support Arguments CA = Counterarguments SD = Source Derogation SB = Source Bolsters. bp < 0. 01 Cp < 0. 05 weighting models (cf. Wright 1973) were unquestionable from the cognitive responses. These models, which are shown in Table 1, are based on an underlying assumption that message recipientsprocess cognitive cues in a mannersuch that opposing cues linearly balance each other. These compensatory models yield a measure of net directionali mpact of the cognitive mediators.Model 1 includes the product/message-related cognitive cues using the difference between the amountof positive ideation and negative ideation engaged in by the message recipients as the predictor of message acceptance. Model 2 adds the repetition-related thoughts to the model and incorporatesall of the relevant cognitions into the cognitive response index. The relationships between the message retentionmeasures(unaidedand aided recall) and attitudeand purchaseintentionwere also examined. Simple regressions were performedusing each model as a predictorof the message acceptancemeasures.The results of these analyses, which were performedseparatelyfor each exposurelevel, are shown in Table 1. This table shows that the cognitive response models are significantly related to the message acceptancemeasuresacross all three exposure conditions. However, the aided and unaided recall scores are not relatedto either attitudeor purchaseintentionat any of the expos ure levels. As can be seen in Table 1, the relationshipof the cognitive response models to the attitudinalmeasure of message acceptanceis strongerin the three-exposurecondition than in the single-exposurecondition, as predicated.However, the differences in these correlationsfor the two exposure levels are not statistically significant (t = 1. 32, p < 0. 10). 5 Table 1 also reveals that the magnitudeof the relationshipbetween the cognitive response models and attitude does not show the hypothesizeddecline between the 5Comparison these correlationcoefficients was made using the folof lowing test statistic three- and five-exposure conditions, but remainsrelatively constant. The relationshipbetween the cognitive response models and purchase intention across the three exposure levels is also shown in Table 1.The correlationsdo not show the predicted increase between the one- and three-exposure conditions. There is an attenuationin the correlationsbetween the three- and five-exposure co nditions however, these differences are not significant(t < 1). These results fail to supportthe hypothesizedchanges in the relationshipbetween cognitive and message acceptance across the three exposure levels. Table 1 also indicatesthat differences exist in the relationshipsbetween cognitive response and the attitudinalmeasure of message acceptance and between cognitive response and the purchaseintention measure in the multiple-exposureconditions.There is an attenuationin the correlationof cognitive response to message acceptance when purchase intention, ratherthan attitude, is the message acceptance criterion. Wright (1973) found a similar attenuationbetween cognitive response and a behavioralintentionversus an attitudinal measureof message acceptance. The attenuationfound in this study may be due to the fact thatbehavioralpatternsfor a productsuch as toothpasteare likely to be well developed. Thus, favorable or unfavorablecognitive reactionsto the message may be related to affe ctive position toward the new brand, but would not necessarily impact on intentionto buy the new brand.I + Vm 1 Vm I/ 1 lNm-3 l/2 In l/2 In 1 I + Vf 1- Vf 3 t= Nf- where Vm and Vf denote the correlationcoefficients for each group and Nm and Nf denote the size of each group. This statistic makes it possible to test the equalityof two correlationcoefficients using a t test (Kleinbaum and Kupper 1978). 62 THEJOURNAL CONSUMER OF RESEARCH sage argumentsand then developing an attitudetowardthe new brand, but ratherwere using the retainedargumentsto support a preformed affective position.This explanation may be particularlyplausible in a low-involvement advertising situation(which one might argue was the case in this study) where global affect, rather than attribute specific information,providesthe basis for consumerevaluationand decision making (cf. Olshavskyand Granbois1979 Wright 1976 Zajonc 1980). The two perspectives regarding the mediating role of cognitive response suggest differen tcausal patternsamong the message acceptance measures and cognitive responses following multiple exposure to a message.The first explanation argues for the traditionalmediatingrole of cognitive responses, whereby the scarper of causal effects originates with repetitionand moves throughcognitive responses that mediateattitude,which in turnmediatespurchaseintention. The competingexplanationsuggests that the flow of effects originates with repetition and moves successively through attitude and purchase intention, which in turn influences cognitive response. This causal flow suggests thatcognitive in responses, particularly the multiple-exposure conditions, are the result of preformedaffect towardthe new brand.To examine the two competing explanationsof the relationships among the variables, a testing of ersatz model forms was undertaken. The tenabilityof each causal model was tested by attemptingto reproducethe original correlationmatrix among the four relevant variables (repetition, cognitive responses, attitude, and purchase intention). Examination of the reproducibility of the original correlationmatrix provides evidence in supportof a proposed model configuration also allows for a comparison and of other alternativeflows.A techniquedeveloped by Simon (1957) for testing simple linear flows of causation was used to examine the relationshipamong these variables. This techniquefor testing a proposed causal flow was used by Lutz (1978) in examining the relationshipsamong beliefs, attitude, and behavioral intention-a problem similar to the presentone. Simon developed a precise set of predictionsfor the magnitudeof correlationbetween nonadjacent pairsof variables in the hypothesized flow of causation, based on notice correlationsbetween adjacent pairs of variables.Specifically, the predicted correlationbetween any two nonadjacent variables is equal to the product of all the pairwise correlations between adjacent interact variables. For example, in the traditiona lcognitive response causal sequence (repetition cognitive response-> attitude-> intention), Simons model would predictthat the simple correlationbetween repetitionand intentionwould be equal to the simple correlationsof repetitionand cognitive response multiplied by the simple correlationof cognitive response and attitudemultipliedby the simple correlationof attitude and intention.Comparisonof predicted and actual correlations provides a measure of fit for the theoreticalexplanations being applied to the data. While this mode of analysis cannot prove that a particularcausal sequence is correct, it is useful for testing competing explanations. Cognitive Responses Mediatorsor Productsof Message Acceptance? A basic assumptionin using the cognitive response approachto studying communicationeffects is that the spontaneous thoughts generated by the message recipients causally mediate affective reactions to a persuasive message.The assumptionthat cognitive responses precede and influen cethe formationof attitudesand intentionshas been made in most cognitive response studies and has been directly tested in several investigations (Cacioppo and Petty 1979 Osterhouse and Brock 1970 Petty and Cacioppo 1977). This study assumed that cognitive response cues generated by the message recipients mediate the effect of repetition on message acceptance,since subjectsin the multipleexposure conditions had the opportunity to become acquainted with the message arguments and had plenty of time to elaborate cognitively upon them. Thus, the responses generatedby the multiple-exposurecondition subjects would be based on the cogency of the message arguments and their reactionsto these arguments,ratherthan on a general, overall impressionof the productand/orcommercial. Evidence in supportof this position is offered by the strong relationshipbetween cognitive response and attitude in the multiple-exposureconditions. There is, however, an alternativehypothesis to the argument that cognit ive responses mediate the effect of repetition on message acceptance.It may be that the thoughts producedby the message recipientsare not really mediating acceptanceof the message, but ratherare a reflectionof the recipients affective position toward the product and/or commercial. Several studies (Tesser and Conlee 1975 Tesser and Cowan 1977) have shown that the opportunityfor thought leads to a polarizationof attitudeswhereby affective position becomes more extreme in the initial direction. onditionsmay Message recipientsin the multiple-exposure have formed an attitudetowardthe new brandafter one or two exposures, while further exposure to and reflection upon the message argumentsmay have led to attitudepolarization. Thus, the cognitive responsesproducedby these subjects may have been a reflection of a previously developed and polarized attituderatherthan mediatingmessage acceptance,the recipientsresponses may thus have offered cognitive justification for their affective position.T his alternativeperspective suggests that the multipleexposure condition subjects were not processing the mes- 6Thereis evidence that the message argumentswere retainedmore in the multiple-exposureconditions than in the single-exposureconditions. The cell means for the unaidedrecall measurewere 1. 70, 2. 33, and 2. 48, while the means for the aided recall measure were 2. 22, 2. 74, and 3. 20. An analysis of varianceperformedon the receptionscores showed thatthe effect of repetitionwas significant for both measures, F (2. 257) = 7. 01 and 11. 25, respectively (p < 0. 1). Pairwise comparisons of the cell means, using the Scheffe test, indicatedthat both recall measuresshowed a significant increase between the one- and three-exposureconditions (p < 0. 05), but not between the three- and five-exposurelevels. REPETITION EFFECTSOF TV COMMERCIAL TABLE 2 INTERCORRELATIONSOF VARIABLES IN HYPOTHESIZED FLOW OF EFFECTS Cognitive response 63 TABLE 3 PREDICTIONS AND DEGREES OF FIT FOR RELATIO NSHIPS AMONG NONADJACENT CAUSAL VARIABLES Degrees of fit Actual Expected Variable Repetition Attitude . 013 . 429 Purchase intention . 31 RCR->Att->PI 1. Repetition 2. Cognitive response 3. Attitude 4. Purchase intention .022 .310 . 692 13 12r23 -. 013 rl2r23r,. r24= r23r, r14= .031 . 310 RAtt->PIl-CR -. 009 (-. 022)(. 429) . 006 (-. 022)(. 429)(. 692) . 297 (. 429)(. 692) In performingthis analysis, the cognitive response variable was operationalizedby using the compensatoryindex derived from model 1 (Table 1). Repetition was assigned a value of 1, 3, or 5, dependingupon exposurelevel. Table 2 shows the observed simple correlationsamong the four variablesof interest.Each variableis numberedto facilitate of interpretation Table 3, which shows the actual and expected correlations among nonadjacentpairs of variables for the two competing causal flows previously described. To compare the degrees of fit of the two models, a total discrepancy score was computed from the correlat ions shown in Table 3. Total discrepancy was operationalized as the sum of the absolute differences between predicted and actual correlations. Table 3 shows that the degree of fit was best for the traditional model, in which cognitive responses mediate message acceptance.The total discrepancyfor this model was 0. 055, while the total discrepancy for the competing model was 0. 278. In additionto the two models previously considered, alternativeorderingsof the cognitive response and message acceptance measures following message repetition were also examined. However, none of these models performedas well as the basic cognitive-responses-as-mediatorsmodel. 13 r12r23 r14 =r2r23r34 r24 =r23r34 .031 -. 022 . 429 -. 015 (-. 022)(. 692) -. 005 (-. 022)(. 692)(. 310) . 214 (. 692)(. 310) intention aRepetitionrCognitive response-Attitude-oPurchaseDISCUSSION The results of this study are not supportiveof Berlynes (1970) two-factor theoretical account of repetition effects nor of Cacioppo and P ettys (1979) two-stage attitudemodification process model. Neither attitudesnor purchaseintentions were affected by the level of advertisingexposure. This is consistent with the results of otherrepetitionstudies that have failed to find a significant main effect for repetition on these outcome measures. The patternof results found for the cognitive response measures was also inconsistent with theoretical expectations.The number of negative product/message-related thoughtsdid not decline between the one- and three-exposure conditions, as had been predicted. The negative thoughtsvariablealso failed to parallelthe resultsfound for the attitude and purchase intention measures for the oneand three-exposureconditions. This inconsistency, which was also found by Calder and Sternthal(1980) and, to a lesser degree, by-Cacioppoand Petty (1980), suggests that there is not always a direct correspondencebetween cognitive response and outcome evaluations.The second stage of two-factortheory and t he two-stage attitudemodificationprocess, which predicts a decrease in affect and an increase in negative thoughts due to tedium and reactance, was partially supported. Neither attitudes nor purchase intentions showed a significant decline between the three- and five-exposure conditions. However, the significant increase in negative repetition-related thoughts between the three- and five-exposure conditions suggests that reactance to the multiple message exposures did become more pronouncedin the high exposure condition.The significant increase in repetition-related thoughts across the three exposure levels is not surprising,but it is noteworthy. Past studies of repetition and cognitive response have not directlyrecognized the possibility thatrepetition-relatedcognitions might occur as a result of excessive exposure to a message instead, they have assumed that the recipients reaction to message repetition impacts on more traditionalcognitive response variables, such as or counterarg uments favorablemessage-relatedthoughts. From a strategicperspective, these findings have implications for the scheduling of adverising messages, particularly over short time periods. While the exposure levels used in this study were high for a one-hour time period, they are not altogether inconsistent with actual media schedvalue uling practices. The results suggest that no short-term is gained from addedexposures. Media schedulesthatresult in high levels of message exposure in a limited time period run the risk of alienatingthe viewer and may not represent Althoughcognitive response measures were not taken in the study by Gom and Goldberg (1980), they did find negative repetition-related reactions to be well-worn Observationof the children suggested that when exposed to the same commercial three or five times, they became annoyedby the repetitions. Remarkssuch as Oh no, not again or not anotherone were common . . . (p. 424). 64 the most effective expenditureof media budgets.Ho wever, ratherthan focusing only on immediate postexposure reactions, it would be helpful to consider the effects of multiple message exposure over longer time periods, in order to determine the persistence of positive or negative responses. Crandall,Harrison,and Zajonc (1975) found that the negative effects of tediumfrom repeatedexposuresmay be only transitory,whereasthe positive effect is permanent. Stang (1974) also found satiationeffects to be short-lived a small measurementdelay was more likely to show positive effects of exposure than an immediate measurement.Research similar to that of Cacioppo and Petty (1980), which uses delayed measures of cognitive response and the attitudechange, is needed to fully understand effects of message repetition. The use of delayed response measures in examining repetition effects is discussed in detail by Sawyer and Ward (1977). The results of this study are supportiveof other investigations suggesting that cognitive responses mediate postmessa ge attitudesand purchase intentions. Moreover, this studyoffers furthersupportfor the viabilityof using thought verbalization data in studying communication effects.While the cognitive response models were capable of explaining a significantamountof the variancein attitudeand purchase intention, the aided and unaided recall measures did not show a significant relationshipto message acceptance despite the increase in recall scores across the three levels of exposure. These findingsare consistentwith other studies which have found that stimulus learningis not necessarily related to affective reactions (Cacioppo and Petty 1979 Greenwald1968 Wright19,73).These resultssupport the argumentthat cognitive cues generatedby the message recipient, ratherthan message arguments, are the primary mediatorsof message acceptance. ReceivedMay 1981. Revised November 1981. 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These tests showed that Shield, with its procure fluorigardformula, has significantly higher levels of fluoride activity than Crest.This means that Shield spreads faster while you brush, actually penetratingand cleaning in between your teeth, where most cavities occur. And Shields fluorigard formulawas also preferredin taste tests. Remember, see your dentist regularly and brush often with new Shield, the only toothpastethat gives your teeth the protectionof fluorigard. REPETITION EFFECTSOF TV COMMERCIAL (1972), Why Three ExposuresMay Be Enough, Journal of AdvertisingResearch, 12 11-14. Leavitt, Clark (1974), Strong Versus Weak Effects of Mass CommunicationsTwo Alternative Hypotheses, in Buyerl ConsumerInformati onProcessing, eds.G. D. Hughes and M. L. Ray, chapel Hill, NC University of North Carolina Press. Lutz, RichardJ. (1978), A FurtherExaminationof Two Laboratory Tests of the Extended Fishbein Attitude Model Rejoinder, Journal of Consumer Research, 4 (March) 266-271. 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