Resumen de Asset returns under periodic revelations of earnings management.
The article investigates stock return dynamics in an environment where executives have an incentive to maximize their compensation by artificially inflating earnings. A principal-agent model with financial reporting and managerial effort is embedded in a Lucas asset-pricing model with periodic revelations of the firm's underlying profitability. The return process generated from the model is consistent with a range of empirical regularities observed in the return data: volatility clustering, asymmetric volatility, and high idiosyncratic volatility. The calibration results further indicate that earnings management can be quantitatively important in accounting for the dynamic patterns of stock returns. [ABSTRACT FROM AUTHOR]
