This paper explores the link between capital market governance and several key characteristics of equity markets. Using detailed data glean from individual stock exchanges, we develop a composite capital market governance measure (CMG index) that captures three dimensions of market regulation...

Much of capital market research in accounting over the past 20 years has assumed that the price adjustment process to information is instantaneous and/or trivial. This basic assumption has had an enormous influence on the way we select research topics, design empirical tests, and interpret...

In this study, we propose an alternative technique for estimating the cost of equity capital. Specifically, we use a discounted residual income model to generate a market implied cost-of-capital. We then examine firm characteristics that are systematically related to this estimate of...

Accounting-based valuation theory suggests that a firm's value (V) is a combination of its book value (B) and market expectations of future earnings. We empirically evaluate the ability of this model to explain the book-to-market (B/P) effect. We find that our empirical proxies of V dominate B...

Accounting-based valuation theory suggests that a firm's value (V) is a combination of its book value (B) and market expectations of future earnings. We empirically evaluate the ability of this model to explain the book-to-market (B/P) effect. We find that our empirical proxies of V dominate B...

We explore a new accounting-based valuation model in an international context. An appealing feature of the model is that it produces a measure of firms' fundamental value, quot;Vquot;, that is immune to accounting differences across countries. We explain why this model has the potential to...

We model the time-series relation between price and intrinsic value as a cointegrated system, so that price and value are long-term convergent. In this framework, we compare the performance of alternative estimates of intrinsic value for the Dow 30 stocks. During 1963-96, traditional market...

Option market activity increases by more than 10% in the four days before quarterly earnings announcements. We show that the direction of this preannouncement trading foreshadows subsequent earnings news. Specifically, we find option traders initiate a greater proportion of long (short)...

Predicted stock issuers (PSIs) are firms with expected “high-investment and low-profit” (HILP) profiles that earn unusually low returns. We carefully document important features of PSI firms to provide insights on the economic mechanism behind the HILP phenomenon. Top-PSI firms are...