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Thought experiments – the net result

so some reader might say well there are no general lessons from this conference experience and you are just being called out for the impolite devil that you are!  No doubt there is some truth to that charge and I wish I had it in me to word things a bit nicer, to be naturally constructive iN conference questions the way I am when I write reviews and editorial letters!

BUT that is not the real issue that should concern accounting academics!  

Every time we deliberately do not cite relevant literature, we are partaking in the silencing of those researchers not cited!  Whether it is a markets researcher not citing experimental research, a field study researcher ignoring markets or experiments on their topic, a markets or experimental researcher ignoring field studies on point to there research – it diminishes the field as a WHOLE. 

While some of the time it is from ignorance that such citations are not made, more and more I ann seeing this as being done deliberately and given the use of databases to readily do literature reviews it is hard to accept the ignorance argument. 

 Furthermore, capital markets and interpretive field researchers tend to be most ” guilty” of such selective citation practices!!!!  I know the term guilty has strong normative tone to it, BUT readers of this blog know that I call it as I see it and deliberately not citing relevant research is wrong – no matter how much you like the person doing it or how much you believe it helps the cause of your research!  Indeed, some field researchers justify this choice by saying markets researchers will not cite me so why should I cite them??? 

 Did your mother not ever tell you ” two wrongs do NOT make a right!”?

Thought experiment 102 – a double standard??

 (Reading the previous blog entry is necessary to follow the line of this one!)

so let’s assume today’s thought experiment is about a capital markets paper.  Let’s assume it is one of the many papers that are attempting to incorporate behavioral finance /’psychology insights into a market reaction to accounting information story.  Let us further assume that the authors cited the underlying psychology research, behavioural finance research and standard market in accounting.

But as you note, there is no mention of the experimental financial accounting research!  But this paper used constructs that were used in experimental financial accounting research.  Furthermore, rather than archival proxies for these constructs, the paper used on line people as surrogates for investors making assessments of constructs commonly employed in financial accounting experimental research!

Let’s also assume this paper was presented to a standard accounting audience.  Likely there are a small but vocal minority of experimental accountants in the room!  What would happen if one of those raised the same questions, but from an exclusion of relevant financial accounting experimental research that I suggested would be asked in the previous post?

Questions like:  Do you think the author might have been accused of ignoring important accounting research literature? Do you think there might have been some suggestions that The author was not very competent in the tone of the questions?  that at the very least by ignoring this literature the results could have been much more informed if the literature was cited?

Well this actually happened at a conference I was recently at and, as you might guess, I was the person asking the questions!  What do you think the reaction of the capital markets folks in the audience was??? 

A circling of the wagons around the author with the suggestion that I was not being constructive!  That my wanting citing of on point research was confrontational!  In other words an attempt to silence the critic just like ignoring the citation of relevant experimental financial accounting experiments silences the contribution of this research in this day and age of citation index importance!

A double standard, is it not!   The next post deals with lessons learned ( beyond the well known fact that I ask tough questions with a bit of an attitude)!!!

Thought experiment 101

to set up this entry let’s assume An author had written an experimental paper that created post-earnings announcement drift in the lab.  Let’s further assume that The author wrote this paper carefully citing the experimental economics literature, the finance and economics literature and other experimental accounting papers that were related to this paper!

But, let’s assume The author did not quote any financial accounting papers other than ball and brown!  No Bernard and thomas, ec etc etc!  After all their work was not immediately relevant to my experimential paper as The author was not attempting to make a market inefficiency versus risk argument!

If The author presented such a paper to a standard accounting audience in most of the world what do you think would be the reaction of capital markets researchers?  

Do you think The author would have faced some tough questions?   Do you think the author might have been accused of ignoring important accounting research literature? Do you think there might have been some suggestions that The author was not very competent in the tone of the questions? That at the very least by ignoring this literature the results could have been much more informed if the literature was cited? 

I think we all know that the answer to all of these latter three questions would be a resounding YES!!!  Would The author have deserved it – YES!  Would it have been a ” feeding frenzy” with lots of questions, some openly hostile, to the author!!! We have all seen this happen…..

BUT what if the shoe were on the other foot? See my next post for the answer!

Curiosity driven research

Readers know how I like to comment on some of the stranger aspects of our field!  I thought I had found another strange but true research paper when I was at the Vic Bernard Memorial Conference at Michigan earlier this week!

The paper involved insider trading based on information advanatages based on milli- seconds!  Wow I thought, we are really grasping at straws here.  We started with annual data, went to quarterly data, then got to interday trades and now we are looking at milli-seconds!

Well boy was I wrong and I am the first to admit it!  It turns out that the informational advantage was created by an unlevel playing field due to the SEC not policing the timing of the release of insider trading data.  Huge profits were being made in those milli- seconds between certain vendors getting this data and general public release.  As this involved profits on the long side it meant real losses to those selling shares!  

So if we believe that one of the reasons we do research has a public interest component to it, this curiosity driven research that did not set out to find this, But it lead to an overhaul of how such information is released by the SEC.  So the next time someone critiques capital markets researchers as going after too small potatoes ( as I have done) think about this one!  As I have said many times you never know where curiosity driven basic accounting research will go.

For the full details of the paper look at Doug skinner’s and co- authors paper on ssrn

Joys of being BLUE

One of the advantages of being a graduate of the University of Michigan is that every so often my name comes up in the queue and I am invited to attend the May Conference at Michigan.  This year the conference is being held in the honour of Vic Bernard, who probably more than any other accounting researcher helped discredit the EMH as finance orthodoxy. Vic, a graduate of the University of Illinois spent most of his academic career at Michigan prior to his untimely passing at a very young age.  I had the honour of being his teaching assistant for a term during my PhD program as well as taking his capital markets class, a class that apparently I was the only one who thoroughly enjoyed it as the others were afraid they were going to make mistakes.  As I knew I knew little, I assumed I would make a lot of mistakes but that I would try to make each mistake only once.  It seemed to work!!!

The substantive advantage for me attending this conference is that it allows me to catch up on state of the art valuation research that I might otherwise not be exposed to.  This conference features papers by Ryan Ball, Doug Skinner, Joe Piotroski, and their co-authors among others!!!  In just taking quick looks at the papers I have learned about issues that I would never have dreamt of about insider trading, road show contents and even an old favorite, mechanical models versus humans in forecasting earning. It is possible that they finally have a mechanical model that outperforms human analysts even in the short run – but a little late wouldn’t you say seeing a computer has already won Jeopardy!!!! 🙂

UT Dallas 24

i have never written about the infamous UT Dallas 24 journals that are suppose to be a measure of the research impact of business schools!  Why, well I never thought anyone would take seriously a list developed by folks at what is at best the fourth best public university in Texas – a strong regional school at best!

But every now and again I hear of Asian Business Schools that rely on this list not only to rank themselves on their research productivity but also to determine tenure and promotion!  Then recently I have begun to hear of European and American schools paying homage to it!  Now in a shocking (to me and I guess I am easily shockable) a major Canadian business school has done the same ( generally we Canadians are pretty level headed but sometimes folks get carried away)!!!!!  

The story behind the UTD 24 deserves more detailed examination and I will tell more of the tale over coming posts!  It is such a funny story if folks did not take is do seriously!

The “gag” factor and research

as one of my current students is fighting the “oh my gosh I just want to be done” with their dissertation and an assistant professor who was a former student tells me about the positive reviews she has gotten for the second time in a row from a journal but still does not have the acceptance on the 4th round I am reminded of the ” gag” or persistence factor!

What I mean is the ability to tolerate yet another rewrite of a paper that you have already rewritten ten, fifteen or twenty times before!  No wonder so many research faculty my age and older like the life of a senior scholar who is called upon to write book chapters, thought pieces and review articles!  Indeed some of these pieces even end up in top journals – JAR ( rarely like this years’ JAR conference) or more normally JAE or AOS!  Even writing for top niche journals provides Dean’s with evidence you are intellectually active!  Plus it comes with the avoidance of the ” gag ” factor!!!!

But research for most of us is a battle from inspiration to publication that causes us sleepless nights, wonders about our sanity and career choices, and the temptation to give in to the positive reinforcement of teaching or the joys oF administration ( even if it is herding cats as at random at least one of the cats will do what you ask whereas reviewers rarely do)!  So for all those gagging along the research road, I salute you!

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