We examine a specific form of what we term analyst contrarianism. We define contrarianism as cases where an analyst expresses a summary opinion contrary to the direction of a given earnings surprise or revision. Distinct from analyst optimism or boldness, we document that analysts interpret...

This study examines reactions of financial analysts to the disclosure of corporate fraud. We posit that analysts downgrade earnings forecasts of fraud firms after fraud disclosure to signal their quality and integrity. We explore how internal and external contingencies shape analysts'...

Some recent empirical works indicate that investor performance and market patterns are primarily information driven instead of a behavioral phenomenon. However, Grossman and Stiglitz information theory and its variations offer little guidance in identifying informed investors and in...

Most of the theories in behavioral finance rely on some kind of psychological biases. However, the potentially boundless set of psychological biases that theorists can use to build behavioral models and explain observed phenomena creates the potential for quot;theory dredging.quot; We develop a...

In economic literature, the cost of obtaining information is generally determined exogenously. In physics, however, there is a long tradition to link the entropic cost of obtaining information to the value of information. Recently, an entropy theory of value, or information theory of value was...

The real option theory offers great insights about project investment by capturing its analogy with financial options. However, at present, most articles on this subject either use stylized numerical examples or adopt a purely conceptual approach to describe how option pricing can be used in...

Economic and biological systems, as open dissipative systems, need to extract negative entropy from the environment to compensate for continuous dissipation. This process can be modeled by lognormal processes, which in turn can be represented by the Black-Scholes equation and option theory....

Self-sustaining non-equilibrium systems, such as economic and biological systems, can be modeled with option pricing theory. We recognize that variable cost of a production mode can be represented by call option price with fixed cost as the strike price. This analytic representation enables us...

To investigate competitive dynamics of the dominant-fringe firm competition, this paper considers a new analytical theory of production and competition, which incorporate the relationships among fixed costs, variable costs, market uncertainty, and product value. We particularly examine the role...

The trading of many derivative securities, especially over the counter derivatives, is designed to implement a specific view and maximize the returns in some particular environment that can not be achieved by standard securities. That is why derivative securities are usually more sensitive than...