Solving the Price-Earnings Puzzle

Solving the Puzzle of Prosociality∗

Homo sapiens is the only species in which we observe extensive cooperation among large numbers of genetically unrelated individuals. Incompatible approaches to explaining cooperation among humans have been offered by sociologists, biologists, and economists. None is wholly successful. Each discipline, moreover, has ignored basic insights of the others. This paper explains cooperation by combini...

The World Price of Earnings Opacity

We analyze the financial statements of 58,653 firm-years from 34 countries for the period 1985-1998 to construct a panel data set measuring three dimensions of reported accounting earnings for each country – earnings aggressiveness, loss avoidance, and earnings smoothing. We hypothesize that these three dimensions are associated with uninformative or opaque earnings, and so we combine these thr...

The Long-Term Price-Earnings Ratio

Determinants of the Price-to-Earnings Ratio

We examine a firm’s P/E ratio in the context of a model wherein firms make sequential investments in production capacity. In addition to investment growth, our analysis seeks to identify pricing power in the firm’s product markets and accounting conservatism as determinants of the P/E ratio. A benchmark result demonstrates that, given unbiased accounting, the firm’s P/E ratio can be expressed a...

Solving Frege’s Puzzle∗

Our actions are a product of mental states that represent how the world is, how we want it to be, and so forth. Such is central to our conception of ourselves as rational agents. I suppose it is possible that this conception is simply wrong. Perhaps there are, as eliminativists have argued, no such things as beliefs and desires. Or perhaps there are, but these states are merely relations to uni...