Sell-side securities analysts who recommend stocks that they own have a conflict of interest. If investors buy the stocks in response to the analysts’ recommendations, the stocks’ prices will rise, increasing the analysts’ personal wealth. Thus, analysts are legally required to disclose financial interests in securities of companies they cover. However, investors might view this disclosure favo...

This paper proposes a risk scoring model to assess the performance of 27 US companies listed online by applying Data Envelopment Analysis (DEA) and comparing with the traditional financial measure Return on Equity (ROE). The DEA evaluation process involves two processes: (1) computation of operating efficiency and effectiveness to measure a company’s operating performance, and (2) measurement o...

The Eckbo-Masulis (1992) theory predicts that a seasoned offer is more likely to be underwritten the higher the proportion of shares expected to be sold to new investors, and further predicts a negative relation between abnormal returns on announcement and sales to new investors. The evidence in this paper does not support these predictions. The proportion underwritten is determined primarily b...

We study the development of a social norm of trust and reciprocity via the contagious strategy as de ned in Kandori (1992) among a group of strangers. The players anonymously and randomly meet each other and play a binary trust game in the in nite horizon. In order to provide the investors with proper incentives to follow the contagious strategy, the su cient condition requires that there exist...

We examine the role of earnings management in explaining the properties of asset prices and stock market participation. We demonstrate that investors’ uncertainty about the extent of manipulation can cause excess movements in stock price relative to fluctuations in output. When faced with information asymmetry about fundamentals in the presence of earnings management, investors demand a higher ...

Do large investors increase the vulnerability of a country to speculative attacks in the foreign exchange markets? To address this issue, we build a model of currency crises where a single large investor and a continuum of small investors independently decide whether to attack a currency based on their private information about fundamentals. Even abstracting from signalling, the presence of the...

In this paper, we derive an equilibrium in which some investors buy call/put options on the market portfolio while others sell them. Since investors are assumed to have similar risk-averse preferences, the demand for these contracts is not explained by di erences in the shape of utility functions. Rather, it is the degree to which agents face other, non-hedgeable, background risks that determin...