We explore the theoretical relation between earnings and market returns as well as the properties of earnings frequency distributions under the assumption that managers use unbiased accounting information to sequentially decide on real options their firms have and report generated earnings...

We examine the influence of common ownership on commonalities in the information environment. Specifically, we study commonalities in financial statements and in the actions of key agents such as financial analysts and firm managers who contribute and respond to the information environment....

The development of the capital markets increases the key role of the financial manager both in using the new techniques for administrating the risks and in assessing hedge effectiveness. Risk means possible uncertainty regarding cash flows, influencing the fair value of assets and liabilities or...

This paper investigates whether and how the initiation of Credit Default Swaps (CDS) trading affects analyst optimism. First, we document that analyst forecasts become less optimistic after the initiation of CDS trading. Second, we find that the dampening effect of CDS on analyst optimism is...

Information gathering is an instinctive response to uncertainty, but such efforts may not fully resolve the uncertainty that prompted them. This implies that proxies for investor information gathering may endogenously reflect investor uncertainty, not only before but also after information...

Complementing prior literature that examines determinants of the sensitivity of returns to losses, we provide evidence that the sensitivity of returns to gains increases with firms' real continuation call options, i.e., their discretionary ability to continue operations, to make new investments,...

Discount factors have a long tradition of being computed using capital market inputs for the estimation of systematic risk. They are of increasing importance in financial accounting, including the valuation of goodwill and other intangibles. In view of the volatility of stock market returns and...

We discuss the valuation of credit derivatives in extreme regimes such as when the time-to-maturity is short, or when payoff is contingent upon a large number of defaults, as with senior tranches of collateralized debt obligations. In these cases, risk aversion may play an important role,...