Advances in quantitative analysis of finance and accounting

Advances in Quantitative Analysis of Finance and Accounting (New Series) is an annual publication designed to disseminate developments in the quantitative analysis of finance and accounting. The publication is a forum for statistical and quantitative analyses of issues in finance and accounting as well as applications of quantitative methods to problems in financial management, financial accounting, and business management. The objective is to promote interaction between academic research in finance and accounting and applied research in the financial community and the accounting profession.

The papers in this volume cover a wide range of topics including corporate finance and debt management, earnings management, equity market, auditing, option pricing theory, and interest rate theory. In this volume there are eleven chapters, five of them are corporate finance and debt management: 1. Liquidity and Adverse Selection: Evidence from the Five-or-Fewer Rule Change; 2. Changing Business Environment and the Value of Relevance of Accounting Information; 3. Pricing Risky Securities in Hidden Markov-Modulated Poisson Processes; 4. An Empirical Assessment of Alternative Dividend Expectation Models; 5. Quantitative Market Risk Disclosure, Bond Default Risk and The Cost of Debt: Why Value At Risk? There are two of the other six chapters which cover interest rate theory: 1. Positive Interest Rates and Yields: Additional Serious Considerations; 2. Collapse of Dimensionality in the Interest Rate Term Structure.

The remaining four chapters cover financial analysts earnings forecasts, equity market, auditing, and option pricing theory. These four papers are: 1. Investors" Apparent Under-weighting of Financial Analysts" Earnings Forecasts: The Role of Share Price Scaling and Omitted Risk Factors; 2. Predicting Stock Price by Applying the Residual Income Model and Bayesian Statistics; 3. Intertemporal Associations Between Non-Audit Services and Auditors’ Tendency to Allow Discretionary Accruals; 4. Put Option Portfolio Insurance vs. Asset Allocation.

Editorial Board
Center for Pacific Basin, Business, Economics, and Finance Research
James S. Ang The Florida State University, U.S.A.
Christopher B. Barry Texas Christian University, U.S.A.
Stephen J. Brown New York University, U.S.A.
Edwin Burmeister Duke University, U.S.A.
Carl R. Chen The University of Dayton, U.S.A.
Ren-Raw Chen Rutgers University, U.S.A.
Son N. Chen National Chengchi University, Taiwan
Cheol S. Eun Georgia Institute of Technology, U.S.A.
Jack C. Francis Baruch College, U.S.A.
Chin-Wen Hsin Yuan-Ze University, Taiwan
Ping Hsiao San Francisco State University, U.S.A.
Dong Cheol Kim Rutgers University, U.S.A.
Stanley J. Kon Smith-Breedan Associate, Inc., U.S.A.
Yun Lin National Taiwan University, Taiwan
Scott C. Linn University of Oklahoma, U.S.A.
William T. Moore University of South Carolina, U.S.A.
R. Richardson Petti University of Houston, U.S.A.
C. W. Sealy University of North Carolina –Charlotte, U.S.A.

Preface to Volume 7 vii
List of Contributors xi
Chapter 1 Liquidity and Adverse Selection: Evidence from the Five- or-Fewer Rule Change 1
Olgun Fuat Sahin, Pattarake Sarajoti
Chapter 2 Investors’ Apparent Under-weighting of Financial Analysts’ Earnings Forecasts: The Role of Share Price Scaling and Omitted Risk Factors 21
Pieter T. Elgers, May H. Lo, Emily L. Xu
Chapter 3 Changing Business Environment and the Value Relevance of Accounting Information 49
Virginia Cortijo, Dan Palmon, Ari Yezegel
Chapter 4 Predicting Stock Price by Applying the Residual Income Model and Bayesian Statistics 71
Huong N. Higgins, Qunfang Flora Lu
Chapter 5 Pricing Risky Securities in Hiddden Markov-Modulated Poisson Processes 95
Yu-Chuan Huang, Shih-Kuei Lin, Chin-Wen Wu
Chapter 6 An Empirical Assessment of Alternative Dividend Expectation Models 121
Ping Zhou, William Ruland
Chapter 7 Intertemporal Associations between Non-Audit Services and Auditors’ Tendency to Allow Discretionary Accruals 149
Myungsoo Son, Kung H. Chen, Aaron D. Crabtree
Chapter 8 Quantitative Market Risk Disclosure, Bond Default Risk and the Cost of Debt: Why Value at Risk? 175
Hongtao Guo
Chapter 9 Positive Interest Rates and Yields: Additional Serious Considerations 215
Jonathan Ingersoll
Chapter 10 Collapse of Dimensionality in the Interest Rate Term Structure 249
Enlin Pan, Liuren Wu
Chapter 11 Put Option Portfolio Insurance vs. Asset Allocation 253
Ken Johnston, John Hatem
Index