COMMERCE 4AF3 Lecture Notes - Lecture 1: Linear Regression, Econometrics, Income Statement
24 Jan 2019
School
Department
Course
Professor
Document Summary
An empirical evaluation of accounting income numbers; ball&brown,1968. Now, we know that things like earnings are useful and it affects things like stock price. Capital theory provides justification for reflecting the behaviour of security prices as a test of usefulness. In market, efficient and unbiased information is used to form stock price. If security price adjusts to new information, the changing price (i. e. stock returns) When do income statement come out (look at 12 months before it"s released and 6 month"s after it"s released) We relate accounting income and stock price. Historically, income of firms tended to move together. In good market, most companies are making money. People will spend money and manufacturers make money. When people lose jobs, don"t have money to spend so companies suffer because they can"t sell products. Financial decisions/policy decisions are reflected in average change of accounting income. Noticed that stock price and rate of return move together.
