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Fair values in extreme markets

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  • Xiaofei Song

Abstract

This study investigates the valuation of fair values in extreme market conditions. Using a modified Ohlson model and a large US sample, this study finds that the valuation of fair values in extreme market conditions is consistent with the presence of a positive feedback loop bias. This bias manifests as irrational exuberance in overheated markets and undue panic in depressed markets. The results are robust under several different test designs. Additional tests of moderating factors show that good performance and low risk intensify irrational exuberance in overhead markets, and poor performance and high risk worsen undue panic in depressed markets.

Suggested Citation

  • Xiaofei Song, 2024. "Fair values in extreme markets," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 64(4), pages 3443-3467, December.
    • Handle: RePEc:bla:acctfi:v:64:y:2024:i:4:p:3443-3467
    DOI: 10.1111/acfi.13261
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