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BUS 421 (19)
Lecture

Ch5.docx

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Department
Business Administration
Course
BUS 421
Professor
Howard Trottier
Semester
Winter

Description
Ch5: The Info approach to decision usefulness The Information Approach: An approach to financial reporting that recognizes individual investor responsibility for predicting future firm performance o Concentrates on providing useful info for predicting firm performance o Assumes securities market efficiency…That mkt will react to useful info from ANY source Ball and Brown Study: GN is positive unexpected earnings o Narrow Window: o Pos abnormal return for GN o Neg for BM o Wide Window o GN outperformed o BN underperformed o Prices lead earnings o Also, greater the change in unexpected earnings, greater the magnitiude of change of security response ERC: The extent of a security`s abnormal market return in response to the unexpected component of reported earnings = (abnormal share return) ÷ (Unexpected earnings for period)
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