BU457 Chapter Notes - Chapter 5: Abnormal Return, Event Study, Stock Split
Document Summary
Chapter 5: accounting research has concluded that security market prices do respond to accounting information, first significant evidence of this was from ball and brown in 1968. Information is useful if it leads investors to change their beliefs and actions: degree of usefulness can be measured by the extent of volume or price change following the release of the information. Information approach approach to financial reporting that recognizes individual responsibility for predicting future firm performance and concentrates on providing useful information for this purpose. There are other factors in the market that affect a firms share price. Thus, it is desirable to separate the impacts of market-wide and firm-specific factors. The market may learn of good or bad news early, and the affects may last a few days after: a complication arises when other firm-specific comes the same time as earnings announced (ie. a stock split).
