Research Note—Prerelease Demand Forecasting for Motion Pictures Using Functional Shape Analysis of Virtual Stock Markets
Prerelease demand forecasting is one of the most crucial yet difficult tasks facing marketers in the $60 billion motion picture industry. We propose functional shape analysis (FSA) of virtual stock markets (VSMs) to address this long-standing challenge. In VSMs, prices of a movie's stock reflect the dynamic demand expectations prior to the movie's release. Using FSA, we identify a small number of distinguishing shapes, e.g., the last-moment velocity spurt, that carry information about a movie's future demand and produce early and accurate prerelease forecasts. We find that although forecasting errors from the existing methods, e.g., those that rely on movie features, can be as high as 90.87%, our approach results in an error of only 4.73%. Because demand forecasting is especially useful for managerial decision making when provided a movie's release, we further demonstrate how our method can be used for early forecasting and compare its power against alternative approaches. We also discuss the theoretical implications of the discovered shapes that may help managers identify indicators of a potentially successful movie early and dynamically.
Volume (Year): 29 (2010)
Issue (Month): 3 (05-06)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Andrew W. Lo & A. Craig MacKinlay, 1987.
"Stock Market Prices Do Not Follow Random Walks: Evidence From a Simple Specification Test,"
NBER Working Papers
2168, National Bureau of Economic Research, Inc.
- Andrew W. Lo, A. Craig MacKinlay, 1988. "Stock Market Prices do not Follow Random Walks: Evidence from a Simple Specification Test," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 41-66.
- Ashish Sood & Gareth M. James & Gerard J. Tellis, 2009. "Functional Regression: A New Model for Predicting Market Penetration of New Products," Marketing Science, INFORMS, vol. 28(1), pages 36-51, 01-02.
- Amos Tversky & Daniel Kahneman, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Levine's Working Paper Archive
7656, David K. Levine.
- Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-291, March.
- Martin Spann & Bernd Skiera, 2003. "Internet-Based Virtual Stock Markets for Business Forecasting," Management Science, INFORMS, vol. 49(10), pages 1310-1326, October.
- Wang, Shanshan & Jank, Wolfgang & Shmueli, Galit, 2008. "Explaining and Forecasting Online Auction Prices and Their Dynamics Using Functional Data Analysis," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 144-160, April.
- Jehoshua Eliashberg & Anita Elberse & Mark A.A.M. Leenders, 2006. "The Motion Picture Industry: Critical Issues in Practice, Current Research, and New Research Directions," Marketing Science, INFORMS, vol. 25(6), pages 638-661, 11-12.
- Ledyard Tucker, 1958. "Determination of parameters of a functional relation by factor analysis," Psychometrika, Springer;The Psychometric Society, vol. 23(1), pages 19-23, March.
- Min Ding & Young-Hoon Park & Eric T. Bradlow, 2009. "Barter Markets for Conjoint Analysis," Management Science, INFORMS, vol. 55(6), pages 1003-1017, June.
When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:29:y:2010:i:3:p:568-579. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.