Abstract Landlords appear to use stale information when setting rents. Among over 43,000 California rental houses in 2018–2019, those last purchased during 2005–2007 (the peak) rent for 2–3% more than those purchased during 2008-2010 (bust). Neither house nor landlord characteristics explain this “peak-bust rental spread.” To clarify the mechanism, we test cross-sectional predictions from a simple theory of rent-setting. We find empirical support for both reference dependence and distorted beliefs. In the first, monthly payments establish (recurring) reference points, against which gains or losses are measured. In the second, past sales prices distort landlords’ current estimates of house values/rents.
{"title":"Peak-Bust Rental Spreads","authors":"M. Giacoletti, Christopher Parsons","doi":"10.2139/ssrn.3482198","DOIUrl":"https://doi.org/10.2139/ssrn.3482198","url":null,"abstract":"Abstract Landlords appear to use stale information when setting rents. Among over 43,000 California rental houses in 2018–2019, those last purchased during 2005–2007 (the peak) rent for 2–3% more than those purchased during 2008-2010 (bust). Neither house nor landlord characteristics explain this “peak-bust rental spread.” To clarify the mechanism, we test cross-sectional predictions from a simple theory of rent-setting. We find empirical support for both reference dependence and distorted beliefs. In the first, monthly payments establish (recurring) reference points, against which gains or losses are measured. In the second, past sales prices distort landlords’ current estimates of house values/rents.","PeriodicalId":224430,"journal":{"name":"Decision-Making in Economics eJournal","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124481449","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We consider the relationship between an individual’s financial self-awareness (FSA), defined as detailed knowledge about one’s current financial assets, liabilities, and spending patterns, and financial outcomes. The results of three studies show that a higher level of FSA is associated with positive financial decisions and satisfaction among individuals. This effect is mediated by perceived efficacy about handling personal finances. We also find that financial literacy strengthens the association between FSA and investing and saving, but does not affect the association between FSA and either financial satisfaction or spending decisions. Increasing the FSA of clients offers a useful method for financial advisors and policymakers to encourage prudent financial decisions.
{"title":"Know Thyself Financially: How Financial Self-awareness Can Benefit Consumers and Financial Advisors","authors":"Nivriti Chowdhry, U. Dholakia","doi":"10.2139/ssrn.3474625","DOIUrl":"https://doi.org/10.2139/ssrn.3474625","url":null,"abstract":"We consider the relationship between an individual’s financial self-awareness (FSA), defined as detailed knowledge about one’s current financial assets, liabilities, and spending patterns, and financial outcomes. The results of three studies show that a higher level of FSA is associated with positive financial decisions and satisfaction among individuals. This effect is mediated by perceived efficacy about handling personal finances. We also find that financial literacy strengthens the association between FSA and investing and saving, but does not affect the association between FSA and either financial satisfaction or spending decisions. Increasing the FSA of clients offers a useful method for financial advisors and policymakers to encourage prudent financial decisions.","PeriodicalId":224430,"journal":{"name":"Decision-Making in Economics eJournal","volume":"42 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-10-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134438954","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Uttara M. Ananthakrishnan, Davide Proserpio, Siddhartha Sharma
The paper show that online reviews can help hotels improve their quality
研究表明，在线评论可以帮助酒店提高质量
{"title":"I Hear You: Does Quality Improve with Customer Voice?","authors":"Uttara M. Ananthakrishnan, Davide Proserpio, Siddhartha Sharma","doi":"10.2139/ssrn.3467236","DOIUrl":"https://doi.org/10.2139/ssrn.3467236","url":null,"abstract":"The paper show that online reviews can help hotels improve their quality","PeriodicalId":224430,"journal":{"name":"Decision-Making in Economics eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-10-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130328097","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We develop a tractable and portable method for characterizing the solution to dynamic multivariate rational inattention models in linear quadratic Gaussian settings. We apply our framework to propose an attention driven theory of the Phillips curve, the slope of which is endogenous to how monetary policy is conducted. We show that the Phillips curve is flatter when the monetary policy is more hawkish: rationally inattentive firms find it optimal to ignore monetary policy shocks when the monetary authority commits to stabilize nominal variables. Moreover, we show that an unexpectedly more dovish monetary policy leads to a completely flat Phillips curve in the short-run and a steeper Phillips curve in the long-run.
{"title":"Dynamic Rational Inattention and the Phillips Curve","authors":"H. Afrouzi, Choongryul Yang","doi":"10.2139/ssrn.3465793","DOIUrl":"https://doi.org/10.2139/ssrn.3465793","url":null,"abstract":"We develop a tractable and portable method for characterizing the solution to dynamic multivariate rational inattention models in linear quadratic Gaussian settings. We apply our framework to propose an attention driven theory of the Phillips curve, the slope of which is endogenous to how monetary policy is conducted. We show that the Phillips curve is flatter when the monetary policy is more hawkish: rationally inattentive firms find it optimal to ignore monetary policy shocks when the monetary authority commits to stabilize nominal variables. Moreover, we show that an unexpectedly more dovish monetary policy leads to a completely flat Phillips curve in the short-run and a steeper Phillips curve in the long-run.","PeriodicalId":224430,"journal":{"name":"Decision-Making in Economics eJournal","volume":"84 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-10-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132528533","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study banks' incentive to pool assets of heterogeneous quality when investors evaluate pools by extrapolating from limited sampling. Pooling assets of heterogeneous quality induces dispersion in investors' valuations without affecting their average. Prices are determined by market clearing assuming that investors can neither borrow nor short‐sell. A monopolistic bank has the incentive to create heterogeneous bundles only when investors have enough money. When the number of banks is sufficiently large, oligopolistic banks choose extremely heterogeneous bundles, even when investors have little money and even if this turns out to be collectively detrimental to the banks. If, in addition, banks can originate low quality assets, even at a cost, this collective inefficiency is exacerbated and pure welfare losses arise. Robustness to the presence of rational investors and to the possibility of short‐selling is discussed.
{"title":"Bundlers' Dilemmas in Financial Markets with Sampling Investors","authors":"Milo Bianchi, P. Jehiel","doi":"10.2139/ssrn.3482350","DOIUrl":"https://doi.org/10.2139/ssrn.3482350","url":null,"abstract":"We study banks' incentive to pool assets of heterogeneous quality when investors evaluate pools by extrapolating from limited sampling. Pooling assets of heterogeneous quality induces dispersion in investors' valuations without affecting their average. Prices are determined by market clearing assuming that investors can neither borrow nor short‐sell. A monopolistic bank has the incentive to create heterogeneous bundles only when investors have enough money. When the number of banks is sufficiently large, oligopolistic banks choose extremely heterogeneous bundles, even when investors have little money and even if this turns out to be collectively detrimental to the banks. If, in addition, banks can originate low quality assets, even at a cost, this collective inefficiency is exacerbated and pure welfare losses arise. Robustness to the presence of rational investors and to the possibility of short‐selling is discussed.","PeriodicalId":224430,"journal":{"name":"Decision-Making in Economics eJournal","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-10-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131561602","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Joelle H. Fong, Benedict S. K. Koh, O. Mitchell, S. Rohwedder
Over the life-cycle, wealth holdings tend to be highest in the early part of retirement. The quality of financial decisions among older adults is therefore an important determinant of their financial security during the asset drawdown phase. This paper assesses how financial literacy shapes financial decision-making at older ages. We devised a special module in the Singapore Life Panel survey to measure financial literacy to study its relationship with three aspects of household financial and investment behaviors: credit card debt repayment, stock market participation, and adherence to age-based investment glide paths. We found that the majority of respondents age 50+ has some grasp of concepts such as interest compounding and inflation, but fewer know about risk diversification. We provide evidence of a statistically significant positive association between financial literacy and each of the three aspects of suboptimal financial decision-making, controlling for many other factors, including education. A one-unit increase in the financial literacy score was associated with an 8.3 percentage point greater propensity to hold stocks, and a 1.7 percentage point higher likelihood of following an age-appropriate investment glide path. The financial literacy score is only weakly positively linked with timely credit card balance repayment, both in terms of statistical significance and estimate size.
{"title":"Financial Literacy and Suboptimal Financial Decisions at Older Ages","authors":"Joelle H. Fong, Benedict S. K. Koh, O. Mitchell, S. Rohwedder","doi":"10.2139/ssrn.3476319","DOIUrl":"https://doi.org/10.2139/ssrn.3476319","url":null,"abstract":"Over the life-cycle, wealth holdings tend to be highest in the early part of retirement. The quality of financial decisions among older adults is therefore an important determinant of their financial security during the asset drawdown phase. This paper assesses how financial literacy shapes financial decision-making at older ages. We devised a special module in the Singapore Life Panel survey to measure financial literacy to study its relationship with three aspects of household financial and investment behaviors: credit card debt repayment, stock market participation, and adherence to age-based investment glide paths. We found that the majority of respondents age 50+ has some grasp of concepts such as interest compounding and inflation, but fewer know about risk diversification. We provide evidence of a statistically significant positive association between financial literacy and each of the three aspects of suboptimal financial decision-making, controlling for many other factors, including education. A one-unit increase in the financial literacy score was associated with an 8.3 percentage point greater propensity to hold stocks, and a 1.7 percentage point higher likelihood of following an age-appropriate investment glide path. The financial literacy score is only weakly positively linked with timely credit card balance repayment, both in terms of statistical significance and estimate size.","PeriodicalId":224430,"journal":{"name":"Decision-Making in Economics eJournal","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123323386","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In recent years many US corporate pension plans have closed and entered their “end-state.” As end-state plans have become more prevalent, their special portfolio management challenges, including asset allocation, have gained attention. Pure immunization with public fixed income assets (“hibernation”) is a possible investment management strategy to try to minimize funding ratio variability. But this may not be sufficient for all end-state plans. For example, mortality risk could cause the actual cash liabilities to deviate from the estimated cash liabilities. This risk may argue for the inclusion of return-seeking assets. In addition, some plans have had good performance experience with their illiquid private assets (e.g., private real estate, private equity, and private credit funds). How can a CIO evaluate the potential of these private assets remaining in their end-state portfolio? We use our asset allocation framework (OASIS™) to help end-state investors solve for optimal asset allocations. An asset allocation solution seeks to maximize the end-state portfolio’s expected horizon value while meeting future cash obligations at a desired confidence level and keeping the funded status at a target level of stability over the investment horizon. We show that private assets can play an important role in helping end-state portfolios achieve their return objectives while meeting their liquidity and funded status stability constraints. CIOs managing end-state portfolios may impose additional constraints to address their specific concerns. For example, CIOs may impose an upper limit on their total allocation to private assets, impose a floor on the plan’s funding ratio, or express views on expected private asset performance and their fund-selection skills. Making asset allocation constraints more restrictive typically implies a less risky portfolio, with a lower allocation to private assets. The OASIS framework helps CIOs measure this tradeoff between performance and their constraints, allowing them to make better business decisions.
{"title":"Asset Allocation for “End-State” Portfolios","authors":"Michelle Teng, Junying Shen","doi":"10.2139/ssrn.3728657","DOIUrl":"https://doi.org/10.2139/ssrn.3728657","url":null,"abstract":"In recent years many US corporate pension plans have closed and entered their “end-state.” As end-state plans have become more prevalent, their special portfolio management challenges, including asset allocation, have gained attention. Pure immunization with public fixed income assets (“hibernation”) is a possible investment management strategy to try to minimize funding ratio variability. But this may not be sufficient for all end-state plans. For example, mortality risk could cause the actual cash liabilities to deviate from the estimated cash liabilities. This risk may argue for the inclusion of return-seeking assets. In addition, some plans have had good performance experience with their illiquid private assets (e.g., private real estate, private equity, and private credit funds). How can a CIO evaluate the potential of these private assets remaining in their end-state portfolio? We use our asset allocation framework (OASIS™) to help end-state investors solve for optimal asset allocations. An asset allocation solution seeks to maximize the end-state portfolio’s expected horizon value while meeting future cash obligations at a desired confidence level and keeping the funded status at a target level of stability over the investment horizon. We show that private assets can play an important role in helping end-state portfolios achieve their return objectives while meeting their liquidity and funded status stability constraints. CIOs managing end-state portfolios may impose additional constraints to address their specific concerns. For example, CIOs may impose an upper limit on their total allocation to private assets, impose a floor on the plan’s funding ratio, or express views on expected private asset performance and their fund-selection skills. Making asset allocation constraints more restrictive typically implies a less risky portfolio, with a lower allocation to private assets. The OASIS framework helps CIOs measure this tradeoff between performance and their constraints, allowing them to make better business decisions.","PeriodicalId":224430,"journal":{"name":"Decision-Making in Economics eJournal","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117193349","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Health care sector plays an increasingly important role in the stock market because it is growing nearly in the entire period and has low correlation with the business cycle. On the other hand, T-Bill is also an important asset in investment because it has positive return and small variance. In this paper, we employ the mean-variance (MV) rules and stochastic dominance (SD) approach to investigate the portfolio performance with and without both health care sector and T-Bill in the US over the period from September 1986 to May 2017. The results show that all the portfolios with health care asset and 6-M TB significantly dominate the corresponding portfolios without health care and 6-M TB, regardless whether short sale is allowed. This study also concludes that the combinations of health care sector and 6-M TB not only reduce risk but also gain better return and all risk-averse investors prefer to invest in portfolios with health care sector and 6-M TB, regardless whether they buy long or sell short the market.
By employing the mean-variance (MV) rules and stochastic dominance (SD) approach, this paper investigates the portfolio performance with and without both health care sector and T-Bill in the U.S. market over the period from September 1986 to May 2017. The results show that all the portfolios with health care asset and 6-m TB significantly dominate the corresponding portfolios without health care and 6-m TB, regardless whether short sale is allowed. This study also concludes that the combinations of health care sector and 6-m TB not only reduce risk but also gain better return; all risk-averse investors prefer to invest in portfolios with health care sector and 6-m TB, regardless whether they buy long or sell short the market.
医疗保健行业在股市中扮演着越来越重要的角色，因为它几乎在整个时期都在增长，与商业周期的相关性很低。另一方面，国库券也是一种重要的投资资产，因为它具有正收益和小方差。在本文中，我们采用均值方差(MV)规则和随机优势(SD)方法研究了1986年9月至2017年5月期间美国有和没有医疗保健部门和美国国债的投资组合表现。结果表明，无论是否允许卖空，所有具有医疗保健资产和6-M结核病的投资组合都明显优于不具有医疗保健和6-M结核病的相应投资组合。本研究还得出结论，医疗保健行业与6-M结核病的组合不仅降低了风险，而且获得了更好的回报，所有厌恶风险的投资者都倾向于投资于医疗保健行业和6-M结核病的投资组合，无论他们是做多还是做空市场。本文采用均值方差(MV)规则和随机优势(SD)方法，研究了1986年9月至2017年5月期间美国市场中医疗保健板块和美国国债的投资组合表现。结果表明，无论是否允许卖空，所有具有医疗保健资产和6 m TB的投资组合都明显优于不具有医疗保健和6 m TB的相应投资组合。本研究还得出结论，卫生保健部门与6百万结核病的结合不仅降低了风险，而且获得了更好的回报;所有规避风险的投资者都倾向于投资于医疗保健行业和600万结核病患者的投资组合，无论他们是做多还是做空。
{"title":"Are the Combinations of Health Care Sector and T-Bill One of the Best Choices for Investment?","authors":"Zhihui Lv, Amanda M. Y. Chu, T. Chiang, W. Wong","doi":"10.2139/ssrn.3409672","DOIUrl":"https://doi.org/10.2139/ssrn.3409672","url":null,"abstract":"Health care sector plays an increasingly important role in the stock market because it is growing nearly in the entire period and has low correlation with the business cycle. On the other hand, T-Bill is also an important asset in investment because it has positive return and small variance. In this paper, we employ the mean-variance (MV) rules and stochastic dominance (SD) approach to investigate the portfolio performance with and without both health care sector and T-Bill in the US over the period from September 1986 to May 2017. The results show that all the portfolios with health care asset and 6-M TB significantly dominate the corresponding portfolios without health care and 6-M TB, regardless whether short sale is allowed. This study also concludes that the combinations of health care sector and 6-M TB not only reduce risk but also gain better return and all risk-averse investors prefer to invest in portfolios with health care sector and 6-M TB, regardless whether they buy long or sell short the market.<br><br>By employing the mean-variance (MV) rules and stochastic dominance (SD) approach, this paper investigates the portfolio performance with and without both health care sector and T-Bill in the U.S. market over the period from September 1986 to May 2017. The results show that all the portfolios with health care asset and 6-m TB significantly dominate the corresponding portfolios without health care and 6-m TB, regardless whether short sale is allowed. This study also concludes that the combinations of health care sector and 6-m TB not only reduce risk but also gain better return; all risk-averse investors prefer to invest in portfolios with health care sector and 6-m TB, regardless whether they buy long or sell short the market.","PeriodicalId":224430,"journal":{"name":"Decision-Making in Economics eJournal","volume":"70 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-06-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116277538","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper seeks to find a way to study and compare theories that analyze consumer decision making from different approaches, using data from Mexico, to detect the factors that determine the patterns of consumption found in the data. Four consumer behavior theories are studied separately: Utility function Cobb and Douglas (1928), Hierarchy of human needs Maslow (1943), Priority approach Chavez-Juarez et al. (2018) and Consumption values (Sheth et al., 1991) and then compare them with each other. To interact all approaches, I used computational models (microsimulation), interpreting each theory in programming algorithms in order to analyze all the theories in a single model. The data resulted from simulations of the Agent-Based Model showed that each approach explains different segments of the population differently, which in terms of public policies means understanding which of many factors should be analyzed to study specific segments of the whole population.
{"title":"Consumer Behavior Using an Agent Based Model: Analyzing 4 Theories","authors":"Ignacio Aguaded","doi":"10.2139/ssrn.3495241","DOIUrl":"https://doi.org/10.2139/ssrn.3495241","url":null,"abstract":"This paper seeks to find a way to study and compare theories that analyze consumer decision making from different approaches, using data from Mexico, to detect the factors that determine the patterns of consumption found in the data. Four consumer behavior theories are studied separately: Utility function Cobb and Douglas (1928), Hierarchy of human needs Maslow (1943), Priority approach Chavez-Juarez et al. (2018) and Consumption values (Sheth et al., 1991) and then compare them with each other. To interact all approaches, I used computational models (microsimulation), interpreting each theory in programming algorithms in order to analyze all the theories in a single model. The data resulted from simulations of the Agent-Based Model showed that each approach explains different segments of the population differently, which in terms of public policies means understanding which of many factors should be analyzed to study specific segments of the whole population.","PeriodicalId":224430,"journal":{"name":"Decision-Making in Economics eJournal","volume":"32 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-06-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126105225","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Value relevance literature suggests that investors are primarily interested in earnings information that can help investors assess equity value. Thus far, most researchers have concentrated on the aggregate level in the relationships between information in the financial statements and the value of the firm. This paper advances the study by exploring what financial statements items that have value relevance to individuals. We examine the value relevance by using the financial statement users’ visual attention data. We ground our model on network theory and employ the eye-tracking technique to examine the centrality of financial statements items. Compare to previous value relevance studies; our method employs a more direct way of investigating the relationship between the financial statement items and the investment decision. We find that most earnings items are the “celebrity actors” or the nodes of individuals’ attention that are relevant to individuals’ investment decision. Our findings corroborate the FASB statement that financial items are interrelated and should not be used independently. We provide new evidence for FASB and IASB to continue their joint project on restructuring the financial statements.
{"title":"The Network Structure within the Financial Statements: An Exploratory Study Using Eye-Tracking Through the Lens of Network Theory","authors":"Yasheng Chen, Tota Panggabean, Cheng-Hsun Lee","doi":"10.2139/SSRN.3405785","DOIUrl":"https://doi.org/10.2139/SSRN.3405785","url":null,"abstract":"Value relevance literature suggests that investors are primarily interested in earnings information that can help investors assess equity value. Thus far, most researchers have concentrated on the aggregate level in the relationships between information in the financial statements and the value of the firm. This paper advances the study by exploring what financial statements items that have value relevance to individuals. We examine the value relevance by using the financial statement users’ visual attention data. We ground our model on network theory and employ the eye-tracking technique to examine the centrality of financial statements items. Compare to previous value relevance studies; our method employs a more direct way of investigating the relationship between the financial statement items and the investment decision. We find that most earnings items are the “celebrity actors” or the nodes of individuals’ attention that are relevant to individuals’ investment decision. Our findings corroborate the FASB statement that financial items are interrelated and should not be used independently. We provide new evidence for FASB and IASB to continue their joint project on restructuring the financial statements.","PeriodicalId":224430,"journal":{"name":"Decision-Making in Economics eJournal","volume":"54 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-06-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114781078","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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