Baruch for helpful comments on earlier drafts. A previous version of this paper was titled " Loss reversals and earnings-based valuation. " All errors are our own. Abstract We hypothesize that when confronted with a loss, investors price earnings conditional on the likelihood of the firm's return to profitability. We argue such pricing is consistent with the abandonment option hypothesis as des...

On December 15, 2010, after 11 months of legal standoff, the Swiss corporation Novartis finally closed a deal to acquire the remaining shares of eye-care company Alcon from minority shareholders. Why did it take almost a year? The acquisition had become a relatedparty transaction after Novartis purchased a 25% stake from then majority shareholder Nestlé and nominated some of its own directors t...

The prefrontal cortex is asymmetric in both structure and function. In normal subjects, the right prefrontal cortex is activated more than the left during response inhibition. Patients with attention deficit hyperactivity disorder (ADHD) have impaired response inhibition and altered structural interhemispheric asymmetry. This study was conducted to examine the functional interhemispheric asymme...

The fair valuation of complex financial products for credit risk transfer (CRT) can provide a good basis for sustained growth of these markets and their recovery after the current financial crisis. Therefore, the risks of these structured credit securities (such as Collateralized Debt Obligations (CDO) and Credit Default Swap-Index tranches) have to be known as well as the investor’s current ri...

The literature on portfolio analysis assumes that the securities returns are random variables with fixed expected returns and variances values (see Bachelier [1], Briec et al. [4] and Markowitz [10]). However, since investors receive efficient or inefficient information from the real world, ambiguous factors usually exist in it. Consequently, we need to consider not only random conditions but a...

This study develops a theoretical model in which the voluntary disclosure of earnings forecast is a double-edged sword. Such disclosure may reduce the information asymmetry between investors and firms but simultaneously allows entrepreneurs create hype. Beginning from 2005 the disclosures of financial forecasts for Taiwanese public companies have not been mandatory, with firms being able to dec...

Why do investors excessively tilt their portfolio towards domestic assets? Recent studies suggest asymmetric information plays a signi…cant role in the home equity bias puzzle. A key assumption in theoretical models is that agents invest in assets and process information on their own. However, most international investments are executed by managers in …nancial institutions. These institutions a...