This article analyzes the implications of money illusion for investor behavior and asset prices in a securities market economy with inflationary fluctuations. We provide a belief-based formulation of money illusion which accounts for the systematic mistakes in evaluating real and nominal...

Can investors with incorrect beliefs survive in financial markets and have a significant impact on asset prices? My paper addresses this issue by analyzing a dynamic general equilibrium model where some investors have rational expectations while others have incorrect beliefs concerning the mean...

This paper analyzes a dynamic general equilibrium model to study the impact of earnings surprises on contemporaneous stock returns. The model shows that earnings surprises can affect stock returns through two channels. On the one hand, earnings surprises affect the expected future earnings of...

This paper presents a dynamic equilibrium model of bond markets in which two groups of agents hold heterogeneous expectations about future economic conditions. The heterogeneous expectations cause agents to take speculative positions against each other and therefore generate endogenous relative...

The idea that uncertainty about a firm’s long-run profitability could increase its stock valuation has been proposed by Pastor and Veronesi (2003) to explain a number of phenomena in financial markets. We further examine this idea by analyzing a simple valuation model for both stocks and...

Conventional wisdom suggests that investors' independent biases should cancel each other out and have little impact on equilibrium at the aggregate level. In contrast to this intuition, this paper analyzes models with biased investors and finds that biases often have a significant impact on the...

increased idiosyncratic volatility. The calibration results further indicate that earnings management by individual firms does not only deliver the observed features in their own stocks, but can also be strong enough to generate market-wide patterns.

Motivated by social and biological interactions, a novel type of phase transition model is provided in order to investigate the emergence of the clustering phenomenon in networks. The model has two types of interactions: one is attractive and the other is repulsive. In each iteration, the phase...

Regulatory investigations affect information in financial markets through two channels: (i) investigations detect financial manipulation and reveal hidden negative information;(ii) regulatory investigations impose adverse consequences for executives involved in manipulation and deter managerial...

Purpose This paper aims to present the spherical entropy image (SEI), a novel global descriptor for the scan registration of three-dimensional (3D) point clouds. This paper also introduces a global feature-less scan registration strategy based on SEI. It is advantageous for 3D data processing in...