Marking to two-price markets

Dilip B Madan ()
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Dilip B Madan: Robert H. Smith School of Business, University of Maryland

Journal of Asset Management, 2016, vol. 17, issue 2, No 4, 100-118

Abstract: Abstract Economic equilibria permitting prices that differ with the trade direction are formulated. As a consequence mark to market is transformed to a mark to two-price market system. The conservatism of the latter is then termed CoCoCoA for continuously contemporary conservative accounting. Both marking systems are implemented for 77 businesses trading mean reversion of performance measures from November 2005 to July 2015. The two accounting systems reveal substantial differences in how the enterprises are ranked.

Keywords: acceptable risks; distorted expectation; mean reversion; performance measures; no arbitrage; two price equilibria (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1057/jam.2015.42

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