We generalize Ohlson (1995) to stochastic interest rates. Our analysis provides four insights. First, the earnings capitalization multiple depends on the lagged rate, not the current rate. Second, the abnormal earnings persistence parameter increases in the current rate and decreases in the...

We generalize Ohlson's (1995) model to stochastic interest rates while making no specific assumptions about the stochastic process of interest rates. Our analysis of the case when earnings suffice for valuation yields three insights. (1) In the valuation function, the multiplier for forthcoming...

How should one conceptualize price-earnings multiples (earnings capitalization factors) when interest rates change stochastically? The paper shows that while the multiplier for forthcoming earnings depends on current rates, the multiplier for current earnings depends on lagged rates. With these...

Valuation techniques are important to practitioners and academics. Although theoretically equity value equals the present value of expected dividends, in practice, higher-level metrics such as free cash flows, earnings, and book values are used for valuation. This paper helps us understand these...

This paper uses experimental asset markets to investigate the evolution of liquidity in anelectronic limit order market. Our market setting includes salient features of electronic markets, as well as informed traders and liquidity traders. We focus on the strategies of the traders, andhow these...

In this research we investigate the behavior of noise traders and their impact on the market. We do this in an experimental market setting that allows us to determine not only how noise traders fare in a competitive asset market with other traders, but also how the equilibrium changes if a...