# David Johnstone

*BA BCom(Hons) PhD CA*

Professor

Rm 414

H69 - Codrington Building

The University of Sydney

NSW 2006 Australia

Telephone |
+61 2 9036 5286 |

Fax |
+61 2 9351 6461 |

Email |
david.johnstone@sydney.edu.au |

## Publications

#### 2016

##### Journal Article/s

**Johnstone D** 2016 Forthcoming 'When are Investments in the Same Risk Class?', Accounting and Finance

**Johnstone D** 2016 'The Effect of Information on Uncertainty and the Cost of Capital', Contemporary Accounting Research, vol.33:2, pp. 752-74

**Johnstone D** 2016 'Advances in Equity Valuation: Research on Accounting Valuation (Editorial)', Abacus, vol.52:1, pp. 1-4

**Jones S, Johnstone D and Wilson R** 2016 Forthcoming 'Predicting Corporate Bankruptcy: An Evaluation of Alternative Statistical Models', Journal of Business Finance and Accounting

**Gan Q, Wei WC and Johnstone D** 2016 Forthcoming 'Does the Probability of Informed Trading Model Fit Empirical Data?', Financial Review

##### Conference Paper/s

**Gan Q, Wei WC and Johnstone D** 2016 Forthcoming 'Does the Probability of Informed Trading Model Fit Empirical Data?', The Quantitative Methods in Finance 2016 Conference, Sydney, Australia, 16th December 2016

#### 2015

##### Book Section/s

**Johnstone D** 2015 'A Bayesian Understanding of Information Uncertainty and the Cost of Capital' in The Routledge Companion to Financial Accounting Theory, ed. Stewart Jones, Routledge, Abingdon, United Kingdom, pp. 396-422

##### Journal Article/s

**Johnstone D** 2015 'Information and the Cost of Capital in a Mean-Variance Efficient Market', Journal of Business Finance and Accounting, vol.42:1&2, pp. 79-100

**Jones S, Johnstone D and Wilson R** 2015 'An Empirical Evaluation of the Performance of Binary Classifiers in the Prediction of Credit Ratings Changes', Journal of Banking and Finance, vol.56, pp. 72-85

**Gan Q, Wei WC and Johnstone D** 2015 'A faster estimation method for the probability of informed trading using hierarchical agglomerative clustering', Quantitative Finance, vol.15:11, pp. 1805-21

**Johnstone D** 2015 'Every Aspect of a Risky Business Affects Its Cost of Capital', JASSA – The Finsia Journal of Applied Finance, vol.4, pp. 6-11

##### Conference Paper/s

**Gan Q, Wei W and Johnstone D** 2015 'Does the Probability of Informed Trading Model Fit Empirical Data?', 2015 Asian Finance Association Annual Conference, Changsha, China, 2nd July 2015

**Gan Q, Wei W and Johnstone D** 2015 'Does the Probability of Informed Trading Model Fit Empirical Data?', 8th Nordic Econometric Meeting NEM2015, University of Helsinki, Finland, 30th May 2015

#### 2014

##### Conference Paper/s

**Christodoulou D, Johnstone D and Peng Z** 2014 'A Bayesian framework for the Information Content of Earnings', World Finance & Banking Symposium, Singapore, 13th December 2014

**Gan Q, Wei W and Johnstone D** 2014 'Does the Probability of Informed Trading Model Fit Empirical Data?', 8th International Conference on Computational and Financial Econometrics CFE 2014, Pisa, Italy, 8th December 2014

**Johnstone D** 2014 'The Risk Premium Under Expected Utility and the Capital Asset Pricing Model', Advances in Decision Analysis Conference, Washington D.C., United States, 18th June 2014

##### Conference Proceeding/s

**Gan Q, Johnstone D and Wei W** 2014 'Cluster PIN: A New Estimation Method for the Probability of Informed Trading', World Finance Conference, Venice, Italy, 4th July 2014

#### 2013

##### Book Section/s

**Johnstone D** 2013 'A Simple Automated Market Maker for Prediction Markets' in The Oxford Handbook of the Economics of Gambling, ed. L Vaughan Williams and D S Siegel , Oxford University Press, New York, United States, pp. 543-59

##### Journal Article/s

**Johnstone D** 2013 'The CAPM Debate and the Logic and Philosophy of Finance', Abacus, vol.49:S1, pp. 1-6

**Johnstone D, Jones S, Jose VR and Peat M** 2013 'Measures of the Economic Value of Probabilities of Bankruptcy', Journal of the Royal Statistical Society: Series A (Statistics in Society), vol.176:3, pp. 635-53

**Johnstone D and Lindley D** 2013 'Mean-Variance and Expected Utility: The Borch Paradox', Statistical Science, vol.28:2, pp. 223-37

##### Conference Paper/s

**Johnstone D** 2013 'The Effect of Information on Certainty and the Cost of Capital', 28th Annual Contemporary Accounting Research Conference CAR 2013, Kingston, Canada, 26th October 2013

#### 2012

##### Journal Article/s

**Johnstone D** 2012 'Log-optimal economic evaluation of probability forecasts', Journal of the Royal Statistical Society Series A, vol.175:3, pp. 661-89

**Jones S and Johnstone D** 2012 'Analyst Recommendations, Earnings Forecasts and Corporate Bankruptcy: Recent Evidence', Journal of Behavioral Finance, vol.13:4, pp. 281–98

**Johnstone D and Curtin B** 2012 'Damages for Negligent Valuation of Mortgage Securities: A Finance Theory Perspective', Company and Securities Law Journal, vol.30:8, pp. 476-92

##### Conference Paper/s

**Johnstone D** 2012 'A Note on Information and the Cost of Capital in a Mean-Variance Efficient Market', Financial Integrity Research Network FIRN 2012 Annual Conference - "The Art of Finance", Hobart, Australia, 11th November 2012

**Johnstone D** 2012 'Log Optimal Evaluation of Probability Forecasts', Royal Statistical Society Ordinary Meetings, London, United Kingdom, 18th January 2012

#### 2011

##### Journal Article/s

**Johnstone D and Lin YX** 2011 'Fitting probability forecasting models by scoring rules and maximum likelihood', Journal of Statistical Planning and Inference, vol.141:5, pp. 1832-7

**Johnstone D and Lindley DV** 2011 'Elementary proof that mean-variance implies quadratic utility', Theory and Decision, vol.70:2, pp. 149-55

**Johnstone D** 2011 'Economic Interpretation of Probabilities Estimated by Maximum Likelihood or Score', Management Science, vol.57:2, pp. 308-14

**Johnstone D, Jose VRR and Winkler RL** 2011 'Tailored Scoring Rules for Probabilities', Decision Analysis, vol.8:4, pp. 256-68

##### Conference Paper/s

**Jones S and Johnstone D** 2011 'Analyst Recommendations, Earnings Forecasts and Corporate Bankruptcies: Recent Evidence', American Accounting Association Annual Meeting 2011 - "Engage to Make a Difference", Denver, United States, 10th August 2011

#### 2010

##### Journal Article/s

**Frino A, Johnstone D and Zheng H** 2010 'Anonymity, Stealth Trading and the Information Content of Broker Identity', Financial Review, vol.45:3, pp. 501-22

**Grant A and Johnstone D** 2010 'Finding Profitable Forecast Combinations Using Probability Scoring Rules', International Journal of Forecasting, vol.26:3, pp. 498-510

##### Conference Paper/s

**Johnstone D** 2010 'Measures of the Economic Value of Bankruptcy Probabilities', Foundations and Applications of Utility, Risk and Decision Theory FUR XIV International Conference 2010, Newcastle, United Kingdom, 18th June 2010

**Johnstone D, Jones S and Peat M** 2010 'Measures of the Economic Value of Bankruptcy Probabilities', 3rd Methodological and Empirical Advances in Financial Analysis MEAFA Workshop, University of Sydney, Australia, 22nd January 2010

#### 2009

##### Journal Article/s

**Johnstone D** 2009 'Discussion of Penman', Abacus, vol.45:3, pp. 372-8

#### 2008

##### Journal Article/s

**Johnstone D** 2008 'What Does an IRR (or Two) Mean?', Journal of Economic Education, vol.39:1, Winter 2008, pp. 78-87

**Johnstone D, Grant A and Kwon O** 2008 'Optimal Betting Strategies for Simultaneous Games', Decision Analysis, vol.5:1, pp. 10-18

**Frino A, Grant J and Johnstone D** 2008 'The House Money Effect and Local Traders on the Sydney Futures Exchange', Pacific-Basin Finance Journal, vol.16:1-2, pp. 8-25

#### 2007

##### Book Section/s

**Johnstone D** 2007 'Investments as bets in the binomial asset pricing model' in Forecasting Expected Returns in the Financial Markets, Academic Press, pp. 251-263

##### Journal Article/s

**Johnstone D** 2007 'The Value of a Probability Forecast from Portfolio Theory', Theory and Decision, vol.63:2, pp. 153-203

**Johnstone D** 2007 'Economic Darwinism: Who Has the Best Probabilities?', Theory and Decision, vol.62:1, pp. 47-96

**Johnstone D** 2007 'What’s the Difference Between the Stockmarket and the Racetrack?', Journal of Gambling Business and Economics, vol.1:2, pp. 121-127

**Johnstone D** 2007 'Discussion of Altman and Sabato', Abacus, vol.43:3, pp. 358-362

**Johnstone D** 2007 'The Parimutuel Kelly Probability Scoring Rule', Decision Analysis, vol.4:2, pp. 66-75

#### 2006

##### Journal Article/s

**Bortoli L, Frino A, Jarnecic E and Johnstone D** 2006 'Limit order book transparency, execution risk, and market liquidity: Evidence from the Sydney Futures Exchange', Journal of Futures Markets, vol.26:12, pp. 1147-1168

**Johnstone D and Furche A** 2006 'Evidence of the Endowment Effect on the Australian Stock Exchange', The Journal of Behavioral Finance, vol.7:3, pp. 145-154

**Johnstone D and Lonergan W** 2006 'The Valuation of Regulated Infrastructure Assets', JASSA, vol.7, pp. 10-14

##### Conference Proceeding/s

**Bortoli L, Frino A, Jarnecic E and Johnstone D** 2006 'Limit order book transparency, execution risk and market liquidity', European Financial Management Annual Meeting, Madrid, Spain, 1st July 2006

#### 2005

##### Journal Article/s

**Frino A, Jarnecic E, Johnstone D and Lepone A** 2005 'Bid-Ask Bounce and the Measurement of Price Behaviour Around Block Trades on the Australian Stock Exchange', Pacific Basin Finance Journal, vol.13:3, pp. 247-262

##### Conference Paper/s

**Bortoli L, Frino A, Jarnecic E and Johnstone D** 2005 'Limit order book transparency, execution risk and market liquidity', 18th Australasian Finance and Banking Conference, Sydney, Australia, 16th December 2005

**Johnstone D** 2005 'Accounting graduate employment destinations and commitment to postgraduate students', Accounting and Finance Association of Australia and New Zealand (AFAANZ) Annual Conference, Melbourne, VIC, Australia, 5th July 2005

**Frino A, Johnstone D and Zheng H** 2005 'The Information Content of Trader Identification', Workshop on Microstructure of Financial Markets, Madrid, Spain, 19th March 2005

##### Conference Proceeding/s

**Johnstone D** 2005 'Choosing an analyst in a simulated betting market', Accounting and Finance Association of Australia and New Zealand (AFAANZ) Annual Conference, Melbourne, VIC, Australia, 5th July 2005

#### 2004

##### Journal Article/s

**Frino A, Johnstone D and Zheng H** 2004 'The propensity for local traders to ride losses: Evidence of irrational or rational behaviour?', Journal of Banking & Finance, vol.28:2, pp. 353-372

##### Conference Proceeding/s

**Johnstone D** 2004 'The value of probability forecast from portfolio theory', Accounting and Finance Association of Australia and New Zealand (AFAANZ) Conference, Alice Springs, NT, Australia, 6th July 2004

#### 2003

##### Journal Article/s

**Johnstone D** 2003 'Prescriptive and Behavioral Explanations of a Reverse Sunk Cost Effect', Theory and Decision, vol.53, pp. 209-242

**Johnstone D** 2003 'Replacement Cost Asset Valuation and the Regulation of Energy Infrastructure Tariffs', Abacus, vol.39:1, pp. 1-41

#### 2002

##### Journal Article/s

**Johnstone D** 2002 'More on the relative efficacy of probability scoring rules', Journal of Statistical Computation and Simulation, vol.72, pp. 11-14

**Johnstone D** 2002 'Public sector outsourcing as an exchange option', Abacus, vol.38, pp. 153-176

**Johnstone D** 2002 'Risk-neutral option pricing from EPV without CAPM', Journal of Financial Education, vol.28, pp. 65-71

**Johnstone D** 2002 'A prospect theory explanation of the disposition to trade losing investments for less than market price', Psychological Reports, vol.90:851-857

#### 1999

##### Journal Article/s

**Johnstone D** 1999 'Public Sector Outsourcing and Charging In-House Bidders for their Use of Capital', Australian Accounting Review, vol.9:33-41

#### 1998

##### Journal Article/s

**Johnstone D** 1998 'Comparing Scoring Rules by Simulation: Which Rule Ranks Forecasters of Known Abilities in Correct Order Most Often?', Journal of Statistical Computation and Simulation, vol.61, pp. 287-292

#### 1997

##### Journal Article/s

**Johnstone D** 1997 'Comparative Classical and Bayesian Interpretations of Statistical Compliance Tests in Auditing', Accounting and Business Research, vol.28, pp. 53-82

**Johnstone D** 1997 'A Paradox of Diminishing Expectations and Increasing Value for Money', Psychological Reports, vol.81, pp. 1124-1126

#### 1996

##### Journal Article/s

**Johnstone D and Gaffikin M** 1996 'Review of the Asset Valuation Guidelines of the Steering Committee on National Performance Monitoring of GTEs', Australian Accounting Review, vol.6, pp. 50-65

#### 1995

##### Journal Article/s

**Johnstone D and Lindley D** 1995 'Bayesian Inference Given Data 'Significant at Level ': Tests of Point Hypotheses', Theory and Decision, vol.38, pp. 51-60

**Johnstone D** 1995 'Audit Risk in Terms of Probabilities', Australian Accounting Review, vol.5, pp. 51-60

**Johnstone D** 1995 'Statistically Incoherent Hypothesis Tests in Auditing (with discussion)', Auditing : A Journal of Theory and Practice, vol.14, pp. 155-199

#### 1994

##### Journal Article/s

**Johnstone D** 1994 'A Statistical Paradox in Auditing', Abacus, vol.30, pp. 44-49

**Johnstone D** 1994 'The Evidence Required by Auditors', Journal of Statistical Computation and Simulation, vol.38:301-303

#### 1992

##### Journal Article/s

**Johnstone D, Dean G and Maniatis H** 1992 'Sensitivity Analysis and Schemes of Arrangement', Australian Accounting Review, vol.2, pp. 34-42

#### 1990

##### Journal Article/s

**Johnstone D** 1990 'Likelihood Logic in Orthodox Significance Tests', Journal of Statistical Computation and Simulation, vol.34, pp. 158-160

**Johnstone D** 1990 'Consistency and Relative Plausibility', Journal of Statistical Computation and Simulation, vol.34, pp. 160-162

**Johnstone D** 1990 'Interpreting Statistical Insignificance: A Bayesian Perspective', Psychological Reports, vol.66, pp. 115-121

**Johnstone D** 1990 'Sample Size and the Strength of Evidence: A Bayesian Interpretation of Binomial Tests of the Information Content of Qualified Audit Reports (with discussion)', Abacus, vol.26, pp. 17-35

**Johnstone D** 1990 'Bayesian Interpretation of the Expression ‘Significant at .05’: A Discrete Example', Perceptual and Motor Skills, vol.71, pp. 307-320

#### 1989

##### Journal Article/s

**Johnstone D** 1989 'On the Necessity for Random Sampling', The British Journal for the Philosophy of Science, vol.40, pp. 443-457

#### 1988

##### Journal Article/s

**Johnstone D** 1988 'Hypothesis Tests and Confidence Intervals in the Single Case', The British Journal for the Philosophy of Science, vol.39, pp. 353-360

**Johnstone D** 1988 'Comments on Oakes on Foundations of Statistical Inference in the Social and Behavioral Sciences: The Market for Statistical Significance', Psychological Reports, vol.63, pp. 353-360

#### 1987

##### Journal Article/s

**Johnstone D** 1987 'Tests of Significance Following R.A. Fisher', The British Journal for the Philosophy of Science, vol.38, pp. 481-414

##### Conference Proceeding/s

**Johnstone D** 1987 'On the Interpretation of Hypothesis Tests following Neyman and Pearson', Probability and Bayesian Statistics: Invited Proceedings of the International Symposium on Probability and Bayesian Statistics, Innsbruck, Austria, 1st January 1987-31st December 1987

#### 1986

##### Journal Article/s

**Johnstone D** 1986 'Tests of Significance in Theory and Practice (with discussion)', The Statistician, vol.35, pp. 401-414