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337
Capital markets research in accounting
, 2001
"... I review empirical research on the relation between capital markets and financial statements.The principal sources of demand for capital markets research in accounting are fundamental analysis and valuation, tests of market efficiency, and the role of accounting numbers in contracts and the politica ..."
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Cited by 300 (9 self)
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I review empirical research on the relation between capital markets and financial statements.The principal sources of demand for capital markets research in accounting are fundamental analysis and valuation, tests of market efficiency, and the role of accounting numbers in contracts and the political process.The capital markets research topics of current interest to researchers include tests of market efficiency with respect to accounting information, fundamental analysis, and value relevance of financial reporting.Evidence from research on these topics is likely to be helpful in capital market investment decisions, accounting standard setting, and corporate financial
Short-sale constraints and stock returns
- Journal of Financial Economics
, 2002
"... Stocks can be overpriced when short-sale constraints bind. We study the costs of short-selling equities from 1926 to 1933, using the publicly observable market for borrowing stock. Some stocks are sometimes expensive to short, and it appears that stocks enter the borrowing market when shorting deman ..."
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Cited by 160 (4 self)
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Stocks can be overpriced when short-sale constraints bind. We study the costs of short-selling equities from 1926 to 1933, using the publicly observable market for borrowing stock. Some stocks are sometimes expensive to short, and it appears that stocks enter the borrowing market when shorting demand is high. We find that stocks that are expensive to short or which enter the borrowing market have high valuations and low subsequent returns, consistent with the overpricing hypothesis. Size-adjusted returns are 1 % to 2 % lower per month for new entrants, and despite high costs it is profitable to short them.
Rational capital budgeting in an irrational world
- Journal of Business
, 1996
"... This paper addresses the following basic capital budgeting question: Suppose that crosssectional differences in stock returns can be predicted based on variables other than beta (e.g., book-to-market), and that this predictability reflects market irrationality rather than compensation for fundamenta ..."
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Cited by 158 (20 self)
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This paper addresses the following basic capital budgeting question: Suppose that crosssectional differences in stock returns can be predicted based on variables other than beta (e.g., book-to-market), and that this predictability reflects market irrationality rather than compensation for fundamental risk. In this setting, how should companies determine hurdle rates? I show how factors such as managerial tune horizons and financial constraints affect the optimal hurdle rate. Under some circumstances, beta can be useful as a capital budgeting tool, even if it is of no use in predicting stock returns.
Time series properties of an artificial stock market
, 1999
"... This paper presents results from an experimental computer simulated stock market. In this market artificial intelligence algorithms take on the role of traders. They make predictions about the future, and buy and sell stock as indicated by their expectations of future risk and return. Prices are set ..."
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Cited by 142 (6 self)
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This paper presents results from an experimental computer simulated stock market. In this market artificial intelligence algorithms take on the role of traders. They make predictions about the future, and buy and sell stock as indicated by their expectations of future risk and return. Prices are set endogenously to clear the market. Time series from this market are analyzed from the standpoint of well-known empirical features in real markets. The simulated market is able to replicate several of these phenomenon, including fundamental and technical predictability, volatility persistence, and leptokurtosis. Moreover, agent behavior is shown to be consistent with these features, in that they condition on the variables that are found to be significant in the time series tests. Agents are also able to collectively learn a homogeneous rational expectations equilibrium for certain parameters giving both time series and individual forecast values
EPA's voluntary 33/50 program: Impact on toxic releases and economic performance of firms
- Journal of Environmental Economics and Management
, 1999
"... This paper examines the motivations for participation in the voluntary 33/50 Program and the Program’s impact on the toxic releases and economic performance of firms in the U.S. chemical industry. It demonstrates that the benefits due to public recognition and the potentially avoided costs of liabil ..."
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Cited by 139 (4 self)
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This paper examines the motivations for participation in the voluntary 33/50 Program and the Program’s impact on the toxic releases and economic performance of firms in the U.S. chemical industry. It demonstrates that the benefits due to public recognition and the potentially avoided costs of liabilities and compliance under mandatory environmental regulations provide strong incentives for participation. After controlling for sample selection bias and the impact of other firm-specific characteristics, this paper shows that Program participation led to a statistically significant decline in toxic releases over the period 1991-93. The Program also had a statistically significant negative impact on the current return on investment of firms, but its impact on the expected long run profitability of firms was positive and statistically significant. 1.
Can the market add and subtract? Mis-pricing in tech stocks carve-outs,”
- Journal of Political Economy
, 2003
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The evolution of emergent computation
- Proceedings of the National Academy of Sciences, SFI
, 1994
"... A simple evolutionary process can discover sophisticated methods for emergent information-processing in decentralized spatially-extended systems. The mechanisms underlying the resulting emergent computation are explicated by a novel technique for analyzing particle-based logic embedded in pattern-fo ..."
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Cited by 119 (22 self)
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A simple evolutionary process can discover sophisticated methods for emergent information-processing in decentralized spatially-extended systems. The mechanisms underlying the resulting emergent computation are explicated by a novel technique for analyzing particle-based logic embedded in pattern-forming systems. Understanding how globally-coordinated computation can emerge in evolution is relevant both for the scientific understanding of natural information processing and for engineering new forms of parallel computing systems. * Correspondence author. Many systems in nature exhibit sophisticated collective information-processing abilities that emerge from the individual actions of simple components interacting via restricted communica-tion pathways. Some often-cited examples include efficient foraging and intricate nest-building in insect societies (1), the spontaneous aggregation of a reproductive multicellular organism from individual amoeba in the life cycle of the Dictyostelium slime mold (2), the parallel and distributed processing of sensory information by assemblies of neurons in the brain (3), and the optimal pricing of goods in an economy arising from agents obeying local rules of commerce (4). Allowing global coordination to emerge from a decentralized collection of simple components
The calculi of emergence: Computation, dynamics, and induction
- PHYSICA D
, 1994
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Investor psychology in capital markets: evidence and policy implications
, 2002
"... We review extensive evidence about how psychological biases affect investor behavior and prices. Systematic mispricing probably causes substantial resource misallocation. We argue that limited attention and overconfidence cause investor credulity about the strategic incentives of informed market par ..."
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Cited by 99 (22 self)
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We review extensive evidence about how psychological biases affect investor behavior and prices. Systematic mispricing probably causes substantial resource misallocation. We argue that limited attention and overconfidence cause investor credulity about the strategic incentives of informed market participants. However, individuals as political participants remain subject to the biases and self-interest they exhibit in private settings. Indeed, correcting contemporaneous market pricing errors is probably not government’s relative advantage. Government and private planners should establish rules ex ante to improve choices and efficiency, including disclosure, reporting, advertising, and default-option-setting regulations. Especially
Human behavior and the efficiency of the financial system
- Handbook of Macroeconomics
, 1999
"... Recent literature in empirical finance is surveyed in its relation to underlying behavioral principles, principles which come primarily from psychology, sociology and anthropology. The behavioral principles discussed are: prospect theory, regret and cognitive dissonance, anchoring, mental compartmen ..."
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Cited by 96 (5 self)
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Recent literature in empirical finance is surveyed in its relation to underlying behavioral principles, principles which come primarily from psychology, sociology and anthropology. The behavioral principles discussed are: prospect theory, regret and cognitive dissonance, anchoring, mental compartments, overconfidence, over- and underreaction, representativeness heuristic, the disjunction effect, gambling behavior and speculation, perceived irrelevance of history, magical thinking, quasi-magical thinking, attention anomalies, the availability heuristic, culture and social contagion, and global culture. Theories of human behavior from psychology, sociology, and anthropology have helped motivate much recent empirical research on the behavior of financial markets. In this paper I will survey both some of the most significant theories (for empirical finance) in these other social sciences and the empirical finance literature itself. Particular attention will be paid to the implications of these theories for the efficient markets hypothesis in finance. This is the hypothesis that financial prices efficiently incorporate all public
