ACCT 455 Lecture Notes - Lecture 6: Risk Measure, Risk Aversion, Loss Aversion
31 Mar 2018
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Beta is non-stationary: beta shifts according to: interest rates, firm"s cost and capital structures, firm"s ability to manage risk, development of global markets. Investor"s limited attention: do not have time/effort to fully understand the changes in quarterly earnings changes: 2. Investors fail to anticipate inflation: investors seem to wait until increased/decreased earnings actually show up: hence share prices drift upward/downward over time depending on inflation, 4. If analysts quickly revise forecast of next-quarter earnings (e. g. within 2 days) erc higher and pad was lower: 5. Investors" lack of confidence in management forecasts: managers usually release a forecast of next q"s earnings when they report current q"s earnings, 6. High earnings volatility firms have lower quarterly earnings persistence and correlations lower potential for pad: pad is not actually lower when earnings volatility increases, 2. Income statement has no information content (same as rra: unrecorded goodwill zero meaning: firm as unrecorded goodwill, e. g. historical cost accounting, conservative accounting, relation to measurement approach:
