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Prior research has documented a ''kink'' in the earnings distribution: too few firms report small losses, too many firms report small profits. We investigate whether boosting of discretionary accruals to report a small profit is a reasonable explanation for this ''kink.'' Overall, we are unable to confirm that boosting of discretionary accruals is the key(More)
(the editor), James Myers and Scott Richardson. We are particularly grateful for the detailed comments and suggestions of Bill Beaver (the referee and discussant) and Jim Ohlson (see Ohlson, 1998). We thank I/B/E/S for the use of analyst forecast data. All views and errors are our own. Abstract This paper provides an empirical assessment of the residual(More)
We propose a new approach to estimate the implied cost of capital (ICC). Our approach is distinct from prior studies in that we do not rely on analysts' earnings forecasts to compute the ICC. Instead, we use a cross-sectional model to forecast the earnings of individual firms. Our approach has two major advantages. First, it allows us to estimate the ICC(More)
We derive an expression for implied equity duration by adapting the traditional expression for bond duration and develop an algorithm for its empirical estimation. We find that the standard empirical predictions and results for bond duration hold for our measure of implied equity duration. Stock return volatilities and betas are increasing in implied equity(More)
SYNOPSIS: We address the fact that accounting academics often have very different perceptions of earnings management than do practitioners and reguiators. Practitioners and reguiators often see earnings management as pervasive and probiem-atic—and in need of immediate remediai action. Academics are more sanguine, unwiiiing to beiieve that earnings(More)
Existing research indicates that firms with high accruals are more likely to experience future earnings problems, but that investors' expectations, as reflected in stock prices, do not appear to anticipate these problems. In this paper, we directly examine the published opinions of two types of professional investor intermediaries to see if they provide(More)
Firms with low ratios of fundamentals (such as earnings and book values) to market values are known to have systematically lower future stock returns. We document that short-sellers position themselves in the stock of such firms, and then cover their positions as the ratios mean-revert. We also show that short-sellers refine their trading strategies to(More)
We examine some basic data on the evolution of aggregate short interest, both during the dot-com era, and at other times in history. Total short interest moves in a countercyclical fashion. For example, short interest in NASDAQ stocks actually declines as the NASDAQ index approaches its peak. Moreover, this decline does not seem to reflect a substitution(More)
Theories of reference-dependent preferences propose that individuals evaluate outcomes as gains or losses relative to a neutral reference point. We test for reference dependence in a large dataset of marathon finishing times (n = 9, 789, 093). Models of reference-dependent preferences such as prospect theory predict bunching of finishing times at reference(More)