Feedback loops, fair value accounting and correlated investments

• 成果类型: Article; Proceedings Paper
• 署名作者: Bloomfield, Robert J.; Nelson, Mark W.; Smith, Steven D.
• 署名单位: Cornell University; University of Illinois System; University of Illinois Urbana-Champaign
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-006-9003-2
• 发表日期: 2006
• 页码: 377-416
• 关键词: irrelevant evidence; valuation; income; ACCOUNTABILITY; disclosure; judgments; forecasts

摘要

This paper presents and tests a model of the price dynamics that arise when investors fail to recognize the redundancy of unrealized gains and losses (UGLs) that are correlated with the firm's past returns. Consistent with the predictions of our model, our experiment shows that a firm's prices and earnings become highly volatile when correlated investment is large and correlated UGLs are made salient by comprehensive income reporting. The results suggest that including correlated UGLs in performance numbers could induce violations of weak-form efficiency that exacerbate volatility in share prices and earnings.