Discussion of 'Limited Attention, Information Disclosure, and Financial Reporting'

This paper discusses Hirshleifer and Teoh's modeling and analysis of "inattentive investors," stock price valuation, and accounting recognition rules and disclosures. The paper derives many plausible empirical predictions from an equilibrium model in which some investors do not process information "fully" or correctly. My discussion focuses on the underlying features of the analysis that drive these results, and speculates as to the robustness of key results. In particular, the systematic "mis-pricing" that persists for long periods of time in the model is very controversial