Paul E. Fischer

Is there Information in an Earnings Announcement Delay

Using a sample of announcements drawn from the 1980s and early 1990s, we reassess the relation between earnings news and earnings announcement timing. Using analyst forecast errors to proxy for news, we find that early announcements are associated with good news relative to late announcements. The relation between news and timing, however, does not appear to be strictly monotonic. Furthermore, we find that unexpected earnings explain 4% or less of the variation in timing. Finally, we assess whether abnormal returns behave in a manner that is consistent with a good news early, bad news late relation.

Public information and heuristic trade

We characterize the steady-state equilibrium in which informed traders who exhibit heuristic (i.e., representativeness, as opposed to Bayesian) and Bayesian behaviors achieve the same expected utility. Then, we show how the endogenous, steady-state proportion of heuristic traders is affected by the quality of public information and other exogenous features of our model. Finally, we discuss how the presence of heuristic traders potentially alters the link between improved public disclosure and: market liquidity, the variance in the change in price, and market efficiency.

Managing Employee Compensation Risk

We analyze a principal-agent model in which the principal (e.g., shareholders) and the agent (e.g., an employee) can personally trade securities tied to the outcome of an uncontrollable event affecting output. The model is employed to address two questions. First, under what conditions does compensation risk management at the individual level substitute for compensation risk management at the firm level? Second, if compensation risk management at the firm level is optimal, how should the compensation risk be managed?

Meeting, Beating, Streaks and Bubbles

The literature in economics and finance document that asset bubbles can emerge and remain sustained for a variety of reasons. In this paper, we develop an analytical model to characterize two types of rational bubbles linked to accounting disclosures, drift bubbles and sensitivity bubbles. We conjecture that both types of bubbles are likely to do so when firms experience streaks of good news. We use our analytical model to generate a number of hypotheses that are expected to hold if drift and/or sensitivity bubbles arise when firms experience streaks of good news, which we proxy for using lengths of meet or beat streaks. In price level regressions, we provide evidence consistent with meet or beat streaks associated with both non-linear drift and non-linear sensitivity price bubbles, consistent with the predictions drawn from the model. We offer less compelling evidence consistent with the model predictions that the drift and sensitivity bubbles should accelerate as a firm continues a streak. We provide reasonable evidence consistent with the drift and sensitivity bubbles unwinding when a firm fails to continue a meet or beat streak. Finally, we find evidence that the industry-wide streak related bubble-like patterns are incremental to the firm-specific patterns we document.