ACC 706 Lecture Notes - Abnormal Return, Stock Split, Efficient-Market Hypothesis
13 Feb 2013
School
Department
Course
Professor
Document Summary
Investors have prior probabilities of future firm performance -> investors obtain new info from fs - >investors revise their probability and make buy/sell decisions -> the volume of shares traded and the market price of the firm"s shares will be changed. Role of fin reporting is to provide useful info for this purpose. Investors are responsible for predicting future firm performance doesn"t not matter. Assuming market efficiency, the market will react to useful information from any source. Decision usefulness = info content = market reacting (the extent of volume or price change) to f. s. Gn or bn in net income -> security price (volume) change. Market reacts not to net income, but to gn or bn. Explains change in chare price benchmark of market reaction. As a researcher you need to know the exact date of release of info, because we believe in market efficiency.
