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...

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...

This paper examines the impact of earnings fixated traders on the asset price in a competitive securities market. In the market, there is a risky asset whose payoff is normally distributed. Earnings fixated traders underestimate the mean and variance of the asset payoff due to the fact that...

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...

We perform an asset market experiment in order to investigate whether overconfidence induces trading. We investigate three manifestations of overconfidence: calibration-based overconfidence, the better-than-average effect and illusion of control. Novelly, the measure employed for...

This paper shows that a monopolistically competitive equilibrium can evolve without purposive profit maximization. Specifically, this paper formulates a precise evolutionary dynamic model of an industry where there is continuous entry of firms that randomly select their output levels on entry...

This paper develops a model to examine how mutual funds set fees charged to investors within a context of non-competitive market structure. The empirical evidence shows that the performance, age, size and cash ratio of the fund have statistically significant impacts on the mutual fund fees but...

With an aversion to losses, there are some traders in financial markets who are not overly aggressive in bidding too high and some traders who are not overly aggressive in selling at too low of a price. This paper shows in an evolutionary model of natural selection within the context of a...

This paper examines the impact on market efficiency of traders who are behaving conservatively in their trading activities to avoid potential losses. To date, the consensus in the literature has been that the presence of well informed traders is necessary for achieving market efficiency. In...

This paper develops a simple signaling model whereby high valuation firm uses levels of investment, debt and dividends to convey information to the market regarding its valuation. Conditions are determined under which investment, debt and dividends are employed in a separating Nash equilibrium....