Informed Traders and Price Variations in the Betting Market for Professional Basketball Games

This paper examines betting line changes from the opening to the closing of the point spread betting market on National Basketball Association games for evidence of informed trader betting. We show that within-betting period line changes significantly improve the accuracy of betting lines as forecasts of game outcomes. We examine individual line change magnitudes and show that these are directly and proportionately related to biases in opening lines. Further, line changes are of sufficient magnitude to remove these biases by the close of betting. We interpret these results as evidence that informed traders are influential in this market.     

Influences on software piracy: Evidence from the various United States

Examining socio-economic influences on software piracy in the United States, we find a negative relationship between software piracy and income, tax burdens, and economic freedom. A 1% increase in per-capita income correlates with a 0.25% reduction in piracy.     

How do nonprofits respond to negative wealth shocks? The impact of the 2008 stock market collapse on hospitals

The theory of cost shifting posits that nonprofit firms “share the pain” of negative financial shocks with their stakeholders, for example, by raising prices. We examine how nonprofit hospitals responded to the sharp reductions in their assets caused by the 2008 stock market collapse. The average hospital did not raise prices, but hospitals with substantial market power did cost shift in this way. We find no evidence that hospitals reduced treatment costs. Hospitals eliminated but left unchanged their offerings of profitable services. Taken together, our results provide mixed evidence on whether nonprofits behave differently from for‐profits.     

Testing the effectiveness of regulatory interest rate risk measurement

A depository institution's interest rate risk (IRR) exposure is the sensitivity of its earnings or market value of equity to changes in interest rates. Since the mid-1980's, bank regulators have developed broadly applied, centralized IRR models which are used to help assess individual institutions' capital adequacy. This paper tests the effectiveness of the earliest of these regulatory IRR models: the incomegap estimates calculated by the Federal Home Loan Bank Board (FHLBB) during the latter 1980's. Despite the many problems caused by the broad application of generic assumptions and the presence of embedded options, we find that the FHLBB gap estimates provided a significant measure of IRR exposure. We believe that these results bode well for the success of ongoing, more sophisticated regulatory modeling efforts.     

Pricing and Mispricing of Accounting Fundamentals in the Time‐Series and in the Cross Section

This study examines the extent to which parsimonious and general cross‐sectional valuation models, restricted to include only publicly available historical accounting information, explain share prices in the cross section, identify periods when market mispricing may be more pervasive, and also identify which shares within those cross sections are more likely to be mispriced. Our model simply includes historical book value, earnings, dividends, and growth, but it explains on average over 60 percent of the cross‐sectional variation in share prices in annual estimations across 1975–2011. We also examine the extent to which the residuals indicate mispricing. The quintile of stocks picked by our model as most likely underpriced outperform the quintile of stocks picked as most likely overpriced by an average of 9.9 percent over the following 12 months, after controlling for size. We also predict and find that value residuals are better predictors of future abnormal returns: (i) among firms that are not covered by analysts; (ii) among firms that face fewer accounting measurement challenges; and (iii) when we estimate value model parameters by industry/year. We also predict and find our approach works better in periods when the mapping of fundamentals into prices is weaker. This study contributes a novel and straightforward approach to map accounting fundamentals into share prices in order to identify mispricing in time‐series and in the cross section.     

Television-Induced Tourism: Evidence from Croatia

Atlantic Economic Journal - This paper analyzes the extent to which the filming of the popular television show Game of Thrones affected tourism in the Croatian city of Dubrovnik. Using monthly data...     

Multigenerational Families and Food Insecurity

The prevalence of multigenerational families is on the rise in the United States, as is food insecurity. We estimate the association of resident grandchildren on transitions in food insecurity using longitudinally linked two‐year panels of the Current Population Survey from 2001 to 2010. We find that rates of food insecurity in families with a grandchild present are at least twice as high in a typical year compared with families without a resident grandchild, and the extent of very low food security increased substantially faster among these households over the past decade. The rise in food insecurity during and after the Great Recession is due to both increased entry into food insecurity and decreased exit out of food insecurity. A similar trend accounts for the rise in multigenerational households during the recession—grandchildren were more likely to move in with their grandparents, and once there, were less likely to move out. Our transition models show that whether grandchildren remain, or in periods of transition, multigenerational families are at heightened risk of entering food insecurity and remaining in this state. However, the entry of a grandchild may not always be a negative for the family's food security, nor the exit of the child a positive. Entrance of a child seems to buffer the family from extreme forms of food insecurity while exit exposes the family to risk of deeper food insecurity.     

A Proposal to Replace 'True and Fair View' With 'Acceptable Risk of Material Misstatement'

This article examines argumentation factors which affect the truth of an audit opinion. We propose that the auditor's report be revised to replace the words 'true and fair view' with 'acceptable risk of material misstatement'. This would better align the communication of auditors with the characteristics of accounting information upon which they report. Adoption of the wording 'acceptable risk of material misstatement' will facilitate a better appreciation by users of financial statements of the accounting estimates in financial statements.     

Earnings management and firm valuation under asymmetric information

This paper seeks to provide an explanation for why corporate officers manage the disclosure of accounting information. We show that earnings management affects firm value when value-maximizing managers and investors are asymmetrically informed. In equilibrium, the strategic management of reported earnings influences investors' assessments of the market values of companies' shares.