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With a growing prominence of sophisticated econometric research in the field of New Economics of Participation (NEP), it is of particular value to learn about real-world examples of participatory and labor-managed firms in the advanced market economies through extensive case studies. In this volume, the authors present such case studies.

We analyze participation decisions in employee stock purchase plans. These plans allow employees to buy company stock at a discount from the market price and resell it immediately for a sure profit. Although an average employee stands to gain $3,079 annually, only 30% of individuals take advantage of this risk-free opportunity. Participation is more likely among employees who are familiar with stocks, are more educated, are less financially constrained, and make fewer errors in valuing financial securities. Our results suggest that compensation plans requiring active decisions by individuals can result in poor financial outcomes for employees of lower socioeconomic status.

Stock ownership as a form of incentive compensation for rank-and-file workers and as part of a comprehensive approach to employment for some workers is becoming more common, not only because it can have a positive impact on the corporate bottom line, but also thanks to its potential to reduce wealth and income inequality-a timely concern. This ebook in the Journal of Participation and Employee Ownership (JPEO) updates the field of employee ownership with a variety of new data and analyses, including recent evidence from non-profit organizations involved in the study of employee ownership, reports on S corporations and worker cooperatives, an analysis of Federal and state policy initiatives meant to encourage the spread of broad-based employee ownership, a report on how the general state of employee ownership in the US is relevant to growing opportunities for transitioning traditionally-owned firms to employee-owned firms, and an empirical paper sorting through some of the major effects of employee stock ownership itself on one of the central theories of interest to economists. The themes raised in these reports and studies elaborate important questions for future research. We believe that these papers will have a significant impact on the field because they provide researchers with critical new empirical insights, access to new data and contemporary analysis, evidence relevant to policy, and a set of policy options that can be discussed in the civic dialogue on economic inequality that has started in the United States and around the world. Our goal with this Ebook is to bring these important materials more quickly to the attention of a wide range of researchers so that the evidence on these new trends can have a deliberative impact on research.

We test and confirm the hypothesis that individual investors are net buyers of attention-grabbing stocks, e.g., stocks in the news, stocks experiencing high abnormal trading volume, and stocks with extreme one-day returns. Attention-driven buying results from the difficulty that investors have searching the thousands of stocks they can potentially buy. Individual investors do not face the same search problem when selling because they tend to sell only stocks they already own. We hypothesize that many investors consider purchasing only stocks that have first caught their attention. Thus, preferences determine choices after attention has determined the choice set.

Most large firms are controlled by shareholders, who choose the board of directors and can replace the firm's management. In rare instances, however, control over the firm rests with the workforce. Many explanations for the rarity of workers' control have been offered, but there have been few attempts to assess these hypotheses in a systematic way. This book draws upon economic theory, statistical evidence, and case studies to frame an explanation. The fundamental idea is that labor is inalienable, while capital can be freely transferred from one person to another. This implies that worker-controlled firms typically face financing problems, encounter collective choice dilemmas, and have difficulty creating markets for control positions within the firm. Together these factors can account for much of what is known about the incidence, behavior, and design of worker-controlled firms. A policy proposal to encourage employee buyouts is developed in the concluding chapter.

We study the relation between mutual fund trades and mass media coverage of stocks. We find that funds exhibit persistent differences in their propensity to buy media-covered stocks. Moreover, this propensity is negatively related to their future performance. Funds in the highest propensity decile underperform funds in the lowest propensity decile by 1.1% to 2.8% per year. These results do not extend to fund sells, likely because of funds' inability to sell short. Overall, the findings suggest that professional investors are subject to limited attention.

Investors' previous experiences with a stock affect their willingness to repurchase that stock. Using detailed trade data from two brokers, the authors document that investors are reluctant to repurchase stocks previously sold for a loss and stocks that have risen in price subsequent to a prior sale. The authors propose that this behavior reflects investors' emotional reactions to trading and their attempts to distance themselves from negative emotions (e.g., disappointment, regret). Investors are disappointed when they sell a stock for a loss and regret having ever purchased the stock; these negative emotions deter investors from later repurchasing stocks they sold for a loss. Having sold a stock, investors are disappointed if the stock continues to rise and regret having sold the stock in the first place; these negative emotions deter investors from repurchasing stocks that go up since being sold. Thus, investors engage in reinforcement learning by repurchasing stocks whose previous purchase resulted in positive emotions and avoiding stocks whose previous purchase resulted in negative emotions.

This paper tests whether information advantages help explain why some individual investors concentrate their stock portfolios in a few stocks. Stock investments made by households that choose to concentrate their brokerage accounts in a few stocks outperform those made by households with more diversified accounts (especially among those with large portfolios). Excess returns of concentrated relative to diversified portfolios are stronger for stocks not included in the S&P 500 index and local stocks, potentially reflecting concentracted investors' successful exploitation of information asymmetries. Controlling for households' average investment abilities, their trades and holdings perform better when their portfolios include fewer stocks.

Open market share repurchase announcements are commonly associated with equity undervaluation, but their signal about firm value can often be misleading. We conjecture that executives who buy shares of their firm before an announcement add credibility to the undervaluation signal. Consistent with this hypothesis, we find that announcement returns are positively related to past insider purchases, especially for firms that are priced less efficiently. Firms whose insiders bought more shares are also more likely to complete their repurchase plans. Finally, we find that insider purchases predict post-announcement stock returns.