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We model the dynamic survival of earning fixated traders in a competitive security market populated by heterogeneous investors that allows for learning and arbitrage. We prove that in the absence of noise traders, rational investors will drive out earnings fixated investors from the market in...
Persistent link: https://www.econbiz.de/10013115173
Natural selection is used to examine a one-sided buyer auction market. With each trader's behavior preprogrammed with its own inherent and fixed probabilities of overpredicting, predicting correctly and underpredicting the fundamental value of the asset, informational efficiency occurs. If each...
Persistent link: https://www.econbiz.de/10013159883
This paper constructs a one-period model of a reporting game where the manager is risk neutral and the asset market is perfectly competitive. The manager chooses the level of the accounting earnings to report to the market in order to influence the market value of the firm. The reported earnings...
Persistent link: https://www.econbiz.de/10012861760
This paper constructs a model of a standard setting game among informed and uninformed investors, an auditor and standard setters to examine how accounting standard setting interacts with informed and uninformed investors' investment decisions. It proves that the levels of investments of...
Persistent link: https://www.econbiz.de/10012861761
This paper presents an one-period model of an one-asset market allowing for the strategic interaction among rational traders and earnings fixated traders. Earnings fixated traders are functionally fixated on the reported earnings numbers in formulating their trading strategies without paying...
Persistent link: https://www.econbiz.de/10012861762
This paper presents a static model of a competitive securities market. In the market there are two assets: risk-free asset and risky asset. The payoff of the risk-free asset is one and the payoff of the risky asset is unknown. Rational traders correctly estimate the mean and variance of the...
Persistent link: https://www.econbiz.de/10012861763
This paper examines how the investor's belief about the project's ability of generating cash flow affects accounting standard setting. It proves analytically that the accounting standard in the Stackelberg equilibrium of the static model increases with the increase in the investor's belief about...
Persistent link: https://www.econbiz.de/10012861766