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Assimilating earnings and split information
Journal of Financial Economics 9 (1981) 309-315. North-Holland
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ASSIMILATING EARNINGS AND SPLIT INFORMATION Is the Capital Market Becoming More Efficient ?* William D. NICHOLS University of Notre Dame, Notre Dame, IN 46556, USA
Stewart L. BROWN Florida State University, Tallahassee, FL 32306, USA
Received November 1979, final version received March 1981
Recent studies have implied that the capital market has become more efficient with respect to the announcements of stock splits and corporate earnings. This study calculated residual returns associated wrth these announcements and then tested, by time period (early and late years), for a between period difference. The results suggest that for certain earnings and split announcements the market is no more efficient than it has been in the past.
1. Introduction Capital market efficiency is an important issue to the academic community as well as to practitioners. Some of the first research published in this area, notably Fama et al. (1969) and Ball and Brown (1968), suggested that announcements of stock splits and corporate earnings had little effect on security returns. However, recent evidence suggests that the market is not entirely efficient with respect to this information, Brown (1978) and Nichols (1978). Watts (1978) and Charest (1978) also concluded that these types of market inefficiencies did indeed exist, but were confined to a restricted time period in the late fifties and early sixties. Their research implies that the capital market has become more efficient over time. This paper presents further evidence on the market’s ability to learn over time. Specifically, we present from two earlier studies, data that are split into early and late time periods. The split-sample results provided no indication of increased market efficiency in the more recent period. *The authors would like to thank the referee, Ross Watts, for his constructive criticisms and comments on earlier versions of this paper.
0304-405X/81/00OO-OOOO/$02.50 0 North-Holland
310
W D. Nichols and S. L. Brown, Earnings and split mformation
2. The Brown study 2.1. The original study Brown (1978) found some market inefficiencies with respect to the announcement of annual earnings that were apparently different from the earnings expected by the market. A forecast error was estimated with the aid of two simple extrapolations, one based on annual and one based on quarterly earnings. Average residuals and cumulative average residuals were examined, on a daily basis, from two days prior to the announcement of annual earnings in the Wall Street Journal through sixty days afterwards.’ The time period of analysis was from 1963 to 1971. The results indicated a cumulative residual return of 4.7 percent over the sixty day period following the earnings announcement. In a recent study, Watts (1978, p. 143) suggested that the residual returns found by Brown may have occurred because his sample period overlapped a 1962 to 1965 period where the Watts study also observed some market inefficiencies. However, Watts observed no such inefficiencies in subsequent periods (1965 to 1968). 2.2. Tests of market efficiency To test the hypothesis that the capital market has become more efficient since the early sixties, the data that Brown used were dichotomized into subperiods by earnings announcement year (early and late years). Cumulative average residuals over the sixty day period after the earnings announcement were then calculated for each group, see table 1. The cumulative return for the late period (1967 to 1971) reached 7.3 percent sixty days after the announcement date, while in the early period (1963 to 1967) the cumulative return reached only 1.8 percent. The t-values for both of the cumulative returns were statistically significant using the firstorder auto-regressive scheme described in Brown (1978, p. 26). The DurbinWatson statistics for the total sample and each sub-period indicated that the first-order auto-regressive scheme was appropriate. The late period had lower forecast errors using both the annual and quarterly forecast models. Therefore, it appears possible that the ‘Since earnings information typically becomes available on the Broad Tape the day prior to its publication in the WaH Street Journal, Brown (1978) included the residual return associated with the announcement day in the calculation of the cumulative average residual. Pate11 and Wolfson (1979) found that approximately 15% of the earnings announcements in their study occurred after the close of trading and consequently would not be impounded in the opening price on the announcement day. Therefore, these returns could not be earned on the announcement day by trading on publicly available information. To avoid this possible bias inherent in the original study, we excluded all announcement day returns when calculating the cumulative average residuals.
W D. Nichols and S. L. Brown, Earnings and split information Table Residual
analysis
of earnings
1
announcements
by time period. Cumulative average residual (f-value) Days +1 to +60
Annual forecast error’
Quarterly forecast errorb
68.6 %
21.5%
4.7 % (3.72)
Early years (n = 57) (1963-Feb. 1967)
73.7 %
25.8 %
1.8% (3.67)
Late years (n = 56) (March 1967-1971)
63.5 %
17.3 %
7.3% (4.56)
Total sample (1963-1971)
(n = 113)
311
‘Based on a naive model where the current year’s annual earnings are expected to equal the previous year’s annual earnings. Therefore, the annual forecast error was the percentage increase in the current year’s annual earnings from the previous year’s annual earmngs. “The quarterly forecast error was the percentage increase m the current year’s annual earnings over an estimate of the expected annual earnings. Expected annual earnings equaled the actual earnings for the first three quarters plus an estimate of the fourth quarter’s earnmgs based on the relationship between the first three quarters’ earnings of the previous year and its subsequent fourth quarter earnings.
informational content of the earnings announcements could have been different in the two sub-periods, thus complicating conclusions about relative efficiency. However, the between period difference in the forecast errors was not statistically significant (t=O.Sl and t=0.27 for the annual and quarterly models, respectively). 2.3. Conclusions The above evidence does not necessarily indicate that the market was less efficient in the late period, but implies that the market was not more efficient as the Watts data suggested. However, the results of the two studies are reconcilable since Brown’s sample selection technique differed significantly from that of Watts. Watts deliberately avoided outliers in earnings changes and used all earnings changes for a random sample of firms. Brown’s sample only included earnings changes that were outliers.’ Therefore, a possible conclusion consistent with the results of both studies is that the capital market, over a period from 1950 to 1971, became more ‘To insure that sigmficant Information was transmitted by the announcement of the annual earnings, Brown’s (1978, p. 18) sample included only companies that met the followmg two criteria; (1) annual earnings had to mcrease at least 20% from the previous year, and (2) actual fourth quarter earnings had to be greater than an estimate of the fourth quarters’ earnings based on the relatlonshlp between the first three quarters’ earnmgs of the previous year and Its subsequent fourth quarter earnings.
312
PKD. Nichols and S.L Brown, Earnings and split information
efficient with respect to the announcements of corporate earnings in general, but appeared to have problems impounding the announcement of certain ‘unexpected’ earnings changes. 3. The Nichols study 3.1. The original study Nichols (1978) examined the adjustment of security returns to the announcement of stock distributions (stock dividends and splits) for the years 1960 to 1975. His results indicated that substantial excess returns were associated with securities issuing stock distributions equal to or greater than 25 % of the shares previously outstanding (splits, hereafter). Charest (1978) also identified some market inefficiencies with respect to stock splits during the three months subsequent to their proposal month. The period examined was 1947 to 1967, but again the excess returns occurred primarily in a restricted sub-period (1956 to 1960). A cross-sectional methodology, very similar to Charest’s was used by Nichols to generate expected returns. 3 His sample included 494 stock splits which had a complete data set on the CRSP tapes for 96 months before and 18 months after the split announcement month. 3.2. Tests of market efficiency The sample was dichotomized into equal sub-samples, early period and late period, corresponding to the years 1960 to 1967 and 1968 to 1975. A chi-squared test rejected the null hypothesis (at the 0.001 level) that the announcement dates of the splits were randomly distributed over the sample period. Therefore, the Nichols study has the event month clustering problem discussed by Brown and Warner (1980). To control for this we calculated an average standardized residual for portfolios (ASR) using the portfolio test approach described by Charest (1978, p. 272). When applying this approach, Charest defined five trading rules, rules A through E. The application of these rules ensured that investments in each sampled security were maintained over 1, 3, 6, 12 and 24 months after the announcement month, respectively. Trading rules B and D were selected to test the Nichols data. Trading rule B (maintain investment over 3 months) was selected because the apparent market inefficiencies found by Charest were most pronounced ‘The Nichols methodology differed from Charest’s in that Nichols used a value-weighted index to estimate individual security betas and Fama-MacBeth (1973) gammas, where as Charest used Fisher’s Arithmetic Index. Nichols calculated moving betas using Charest’s Method 1. Professor James Ellert of Queen’s University, Kingston, Ontario, provided the value-weighted estimates of the Fama-MacBeth gammas. We are indebted to Professor Ellert for providing this data.
WD. Nichols and XL. Brown, Earnings and split information
313
when applying this trading rule. Trading rule D (maintain investment over 12 months) was used because it was the longest of the five trading rules that could be tested with the Nichols data which only extended eighteen months beyond the split announcement month. The results of applying these two trading rules are reported in table 2. Table 2 Residual analysis of split announcements by time period using two trading rules.’ Trading rule B Average No. of standardized portfolios residual for formed portfolios
Trading rule D Average No. of standardized portfolios residual for t-value formed portfolios
r-value
163
0.1994
2.55 * 173
-0.0124
-0.16
Early years (n = 247) (1960-1967)
79
0.0652
0.58
83
- 0.0022
- 0.02
Late years (n = 247) (1968-1975)
84
0.3257
2.99
90
-0.0217
- 0.20
Total sample (n=494) (1960-1975)
“For trading rules B and D the splitting securities are held for three and twelve months, respectively, beyond the announcement month. r-values are given in accordance wrth Charest’s equal-weighted approach (1978, p. 274).
Using trading rule B the t-values associated with the ASR’s were statistically significant for the total sample period (t=2.55) and the late subperiod (t=2.99). However, the t-value associated with the early sub-period (t=0.58) was not statistically significant. These tests of market efficiency were highly dependent on the trading rule applied. Using trading rule D none of the ASR’s presented in table 2 were statistically significant.4 Using trading rule B, the ASR associated with the late sub-period was significantly greater than that of the early sub-period (t= 1.67). This, however, was not the case using trading rule D (t=0.14). This between period analysis should not have been affected by the size (e.g., 3 :2, 2 : 1, etc.) mix of the splits contained in each sub-period. The stock splits were almost equally divided by distribution size between sub-periods. A chi-squared test could not reject the null hypothesis (at the 0.25 level) that one-half of the total splits, by size class, were included in each sub-period. 3.3. Conclusions The results using trading rule B are consistent with the Charest study for 4Tested but not presented in table 2 were trading rules A (maintain investment over 1 month), C (maintain investment over 6 months), and a rule unique to this study, given the configuration of Nichols’ data, maintain investment over 18 months. None of these trading rules indicated market inefficiency for the total sample period or either sub-period.
314
WD. Nichols and S.L. Brown, Earnings and split information
the limited period of overlap. Charest (1978, table 8) partitioned his data into sub-periods and applied trading rule B. For the fourth sub-period (CRSP months 415 to 458) the market appeared efficient, the t-value for the ASR was not significant (t=0.67). Our early period (CRSP months 415 to 506) overlapped 43 of these months and also reported a t-value consistent with market efficiency (t=0.58, see table 2). Assuming a valid underlying model of market equilibrium, the results of both studies suggest that the market was efficient in the early and middle sixties with respect to stock splits. However, using trading rule B, our late sub-period results, a sub-period not investigated by Charest, do not support this conclusion. In fact, our results suggest that market inefficiencies can also be found in a later time period, 1968 to 1975. The evidence supporting the late sub-period inefficiencies is not overwhelming. Charest (1978, table 7) found market efficiencies when applying trading rule D in accordance with the equal-weighted approach. Our data did not. For trading rule D it appears that either the market became more efficient or the inefficiencies were restricted to the late fifties, a period we did not examine and for which Charest did not report partitioned data. Therefore, our conclusions regarding market inefficiency are restricted to a sub-period (1968 to 1975) and one particular trading rule (rule B).
4. Summary of conclusions The issue of market efficiency with respect to publicly available information has not been settled. Some recent research suggests that the market inefficiencies so far identified existed only for fairly restricted time periods in the late fifties and early sixties. Using data from previous studies, the authors found that the market, in a statistical sense, does not appear to be any more efficient with respect to certain announcements of stock splits and unexpected changes in corporate earnings than it had been in the past.
References Ball, R. and P. Brown, 1968, An empirical evaluation of accounting numbers, Journal of Accounting Research 6, 159-179. Brown, S., 1978, Earnmgs changes, stock prrces, and market etliciency, Journal of Finance 33, 17728. Brown, S. and J. Warner, 1980, Measuring securtty price performance, Journal of Fmancial Economics 8, 205258. Charest, G., 1978, Spht mformatron, stock returns, and market efftctency, Journal of Financtal Economics 6. 256296. Fama, E. and J. MacBeth, 1973, Risk, return and equilibrium: Emprrical tests, Journal of Political Economy 71, May/June, 606636. Fama, E., L. Fisher, M. Jensen and R. Roll, 1969, The adjustment of stock prices to new mformation, International Economic Review 10, 1-21.
WD. Nichols and S.L. Brown, Earnings and split information
315
Nichols, W., 1978, An empirical study of stock splits and stock dividends, their accountmg treatment and the market’s perception of their economic value, D.B.A. dissertation (Florida State University, Tallahassee, FL). Patell, J. and M. Wolfson, 1979, The timing of financial accountmg disclosures and the intraday distribution of security price changes, Unpublished paper (Graduate School of Business, Stanford University, Stanford, CA). Watts, R., 1978, Systematic ‘abnormal’ returns after quarterly earnings announcements, Journal of Financial Economics 6, 127-150.
Publishing Company
ASSIMILATING EARNINGS AND SPLIT INFORMATION Is the Capital Market Becoming More Efficient ?* William D. NICHOLS University of Notre Dame, Notre Dame, IN 46556, USA
Stewart L. BROWN Florida State University, Tallahassee, FL 32306, USA
Received November 1979, final version received March 1981
Recent studies have implied that the capital market has become more efficient with respect to the announcements of stock splits and corporate earnings. This study calculated residual returns associated wrth these announcements and then tested, by time period (early and late years), for a between period difference. The results suggest that for certain earnings and split announcements the market is no more efficient than it has been in the past.
1. Introduction Capital market efficiency is an important issue to the academic community as well as to practitioners. Some of the first research published in this area, notably Fama et al. (1969) and Ball and Brown (1968), suggested that announcements of stock splits and corporate earnings had little effect on security returns. However, recent evidence suggests that the market is not entirely efficient with respect to this information, Brown (1978) and Nichols (1978). Watts (1978) and Charest (1978) also concluded that these types of market inefficiencies did indeed exist, but were confined to a restricted time period in the late fifties and early sixties. Their research implies that the capital market has become more efficient over time. This paper presents further evidence on the market’s ability to learn over time. Specifically, we present from two earlier studies, data that are split into early and late time periods. The split-sample results provided no indication of increased market efficiency in the more recent period. *The authors would like to thank the referee, Ross Watts, for his constructive criticisms and comments on earlier versions of this paper.
0304-405X/81/00OO-OOOO/$02.50 0 North-Holland
310
W D. Nichols and S. L. Brown, Earnings and split mformation
2. The Brown study 2.1. The original study Brown (1978) found some market inefficiencies with respect to the announcement of annual earnings that were apparently different from the earnings expected by the market. A forecast error was estimated with the aid of two simple extrapolations, one based on annual and one based on quarterly earnings. Average residuals and cumulative average residuals were examined, on a daily basis, from two days prior to the announcement of annual earnings in the Wall Street Journal through sixty days afterwards.’ The time period of analysis was from 1963 to 1971. The results indicated a cumulative residual return of 4.7 percent over the sixty day period following the earnings announcement. In a recent study, Watts (1978, p. 143) suggested that the residual returns found by Brown may have occurred because his sample period overlapped a 1962 to 1965 period where the Watts study also observed some market inefficiencies. However, Watts observed no such inefficiencies in subsequent periods (1965 to 1968). 2.2. Tests of market efficiency To test the hypothesis that the capital market has become more efficient since the early sixties, the data that Brown used were dichotomized into subperiods by earnings announcement year (early and late years). Cumulative average residuals over the sixty day period after the earnings announcement were then calculated for each group, see table 1. The cumulative return for the late period (1967 to 1971) reached 7.3 percent sixty days after the announcement date, while in the early period (1963 to 1967) the cumulative return reached only 1.8 percent. The t-values for both of the cumulative returns were statistically significant using the firstorder auto-regressive scheme described in Brown (1978, p. 26). The DurbinWatson statistics for the total sample and each sub-period indicated that the first-order auto-regressive scheme was appropriate. The late period had lower forecast errors using both the annual and quarterly forecast models. Therefore, it appears possible that the ‘Since earnings information typically becomes available on the Broad Tape the day prior to its publication in the WaH Street Journal, Brown (1978) included the residual return associated with the announcement day in the calculation of the cumulative average residual. Pate11 and Wolfson (1979) found that approximately 15% of the earnings announcements in their study occurred after the close of trading and consequently would not be impounded in the opening price on the announcement day. Therefore, these returns could not be earned on the announcement day by trading on publicly available information. To avoid this possible bias inherent in the original study, we excluded all announcement day returns when calculating the cumulative average residuals.
W D. Nichols and S. L. Brown, Earnings and split information Table Residual
analysis
of earnings
1
announcements
by time period. Cumulative average residual (f-value) Days +1 to +60
Annual forecast error’
Quarterly forecast errorb
68.6 %
21.5%
4.7 % (3.72)
Early years (n = 57) (1963-Feb. 1967)
73.7 %
25.8 %
1.8% (3.67)
Late years (n = 56) (March 1967-1971)
63.5 %
17.3 %
7.3% (4.56)
Total sample (1963-1971)
(n = 113)
311
‘Based on a naive model where the current year’s annual earnings are expected to equal the previous year’s annual earnings. Therefore, the annual forecast error was the percentage increase in the current year’s annual earnings from the previous year’s annual earmngs. “The quarterly forecast error was the percentage increase m the current year’s annual earnings over an estimate of the expected annual earnings. Expected annual earnings equaled the actual earnings for the first three quarters plus an estimate of the fourth quarter’s earnmgs based on the relationship between the first three quarters’ earnings of the previous year and its subsequent fourth quarter earnings.
informational content of the earnings announcements could have been different in the two sub-periods, thus complicating conclusions about relative efficiency. However, the between period difference in the forecast errors was not statistically significant (t=O.Sl and t=0.27 for the annual and quarterly models, respectively). 2.3. Conclusions The above evidence does not necessarily indicate that the market was less efficient in the late period, but implies that the market was not more efficient as the Watts data suggested. However, the results of the two studies are reconcilable since Brown’s sample selection technique differed significantly from that of Watts. Watts deliberately avoided outliers in earnings changes and used all earnings changes for a random sample of firms. Brown’s sample only included earnings changes that were outliers.’ Therefore, a possible conclusion consistent with the results of both studies is that the capital market, over a period from 1950 to 1971, became more ‘To insure that sigmficant Information was transmitted by the announcement of the annual earnings, Brown’s (1978, p. 18) sample included only companies that met the followmg two criteria; (1) annual earnings had to mcrease at least 20% from the previous year, and (2) actual fourth quarter earnings had to be greater than an estimate of the fourth quarters’ earnings based on the relatlonshlp between the first three quarters’ earnmgs of the previous year and Its subsequent fourth quarter earnings.
312
PKD. Nichols and S.L Brown, Earnings and split information
efficient with respect to the announcements of corporate earnings in general, but appeared to have problems impounding the announcement of certain ‘unexpected’ earnings changes. 3. The Nichols study 3.1. The original study Nichols (1978) examined the adjustment of security returns to the announcement of stock distributions (stock dividends and splits) for the years 1960 to 1975. His results indicated that substantial excess returns were associated with securities issuing stock distributions equal to or greater than 25 % of the shares previously outstanding (splits, hereafter). Charest (1978) also identified some market inefficiencies with respect to stock splits during the three months subsequent to their proposal month. The period examined was 1947 to 1967, but again the excess returns occurred primarily in a restricted sub-period (1956 to 1960). A cross-sectional methodology, very similar to Charest’s was used by Nichols to generate expected returns. 3 His sample included 494 stock splits which had a complete data set on the CRSP tapes for 96 months before and 18 months after the split announcement month. 3.2. Tests of market efficiency The sample was dichotomized into equal sub-samples, early period and late period, corresponding to the years 1960 to 1967 and 1968 to 1975. A chi-squared test rejected the null hypothesis (at the 0.001 level) that the announcement dates of the splits were randomly distributed over the sample period. Therefore, the Nichols study has the event month clustering problem discussed by Brown and Warner (1980). To control for this we calculated an average standardized residual for portfolios (ASR) using the portfolio test approach described by Charest (1978, p. 272). When applying this approach, Charest defined five trading rules, rules A through E. The application of these rules ensured that investments in each sampled security were maintained over 1, 3, 6, 12 and 24 months after the announcement month, respectively. Trading rules B and D were selected to test the Nichols data. Trading rule B (maintain investment over 3 months) was selected because the apparent market inefficiencies found by Charest were most pronounced ‘The Nichols methodology differed from Charest’s in that Nichols used a value-weighted index to estimate individual security betas and Fama-MacBeth (1973) gammas, where as Charest used Fisher’s Arithmetic Index. Nichols calculated moving betas using Charest’s Method 1. Professor James Ellert of Queen’s University, Kingston, Ontario, provided the value-weighted estimates of the Fama-MacBeth gammas. We are indebted to Professor Ellert for providing this data.
WD. Nichols and XL. Brown, Earnings and split information
313
when applying this trading rule. Trading rule D (maintain investment over 12 months) was used because it was the longest of the five trading rules that could be tested with the Nichols data which only extended eighteen months beyond the split announcement month. The results of applying these two trading rules are reported in table 2. Table 2 Residual analysis of split announcements by time period using two trading rules.’ Trading rule B Average No. of standardized portfolios residual for formed portfolios
Trading rule D Average No. of standardized portfolios residual for t-value formed portfolios
r-value
163
0.1994
2.55 * 173
-0.0124
-0.16
Early years (n = 247) (1960-1967)
79
0.0652
0.58
83
- 0.0022
- 0.02
Late years (n = 247) (1968-1975)
84
0.3257
2.99
90
-0.0217
- 0.20
Total sample (n=494) (1960-1975)
“For trading rules B and D the splitting securities are held for three and twelve months, respectively, beyond the announcement month. r-values are given in accordance wrth Charest’s equal-weighted approach (1978, p. 274).
Using trading rule B the t-values associated with the ASR’s were statistically significant for the total sample period (t=2.55) and the late subperiod (t=2.99). However, the t-value associated with the early sub-period (t=0.58) was not statistically significant. These tests of market efficiency were highly dependent on the trading rule applied. Using trading rule D none of the ASR’s presented in table 2 were statistically significant.4 Using trading rule B, the ASR associated with the late sub-period was significantly greater than that of the early sub-period (t= 1.67). This, however, was not the case using trading rule D (t=0.14). This between period analysis should not have been affected by the size (e.g., 3 :2, 2 : 1, etc.) mix of the splits contained in each sub-period. The stock splits were almost equally divided by distribution size between sub-periods. A chi-squared test could not reject the null hypothesis (at the 0.25 level) that one-half of the total splits, by size class, were included in each sub-period. 3.3. Conclusions The results using trading rule B are consistent with the Charest study for 4Tested but not presented in table 2 were trading rules A (maintain investment over 1 month), C (maintain investment over 6 months), and a rule unique to this study, given the configuration of Nichols’ data, maintain investment over 18 months. None of these trading rules indicated market inefficiency for the total sample period or either sub-period.
314
WD. Nichols and S.L. Brown, Earnings and split information
the limited period of overlap. Charest (1978, table 8) partitioned his data into sub-periods and applied trading rule B. For the fourth sub-period (CRSP months 415 to 458) the market appeared efficient, the t-value for the ASR was not significant (t=0.67). Our early period (CRSP months 415 to 506) overlapped 43 of these months and also reported a t-value consistent with market efficiency (t=0.58, see table 2). Assuming a valid underlying model of market equilibrium, the results of both studies suggest that the market was efficient in the early and middle sixties with respect to stock splits. However, using trading rule B, our late sub-period results, a sub-period not investigated by Charest, do not support this conclusion. In fact, our results suggest that market inefficiencies can also be found in a later time period, 1968 to 1975. The evidence supporting the late sub-period inefficiencies is not overwhelming. Charest (1978, table 7) found market efficiencies when applying trading rule D in accordance with the equal-weighted approach. Our data did not. For trading rule D it appears that either the market became more efficient or the inefficiencies were restricted to the late fifties, a period we did not examine and for which Charest did not report partitioned data. Therefore, our conclusions regarding market inefficiency are restricted to a sub-period (1968 to 1975) and one particular trading rule (rule B).
4. Summary of conclusions The issue of market efficiency with respect to publicly available information has not been settled. Some recent research suggests that the market inefficiencies so far identified existed only for fairly restricted time periods in the late fifties and early sixties. Using data from previous studies, the authors found that the market, in a statistical sense, does not appear to be any more efficient with respect to certain announcements of stock splits and unexpected changes in corporate earnings than it had been in the past.
References Ball, R. and P. Brown, 1968, An empirical evaluation of accounting numbers, Journal of Accounting Research 6, 159-179. Brown, S., 1978, Earnmgs changes, stock prrces, and market etliciency, Journal of Finance 33, 17728. Brown, S. and J. Warner, 1980, Measuring securtty price performance, Journal of Fmancial Economics 8, 205258. Charest, G., 1978, Spht mformatron, stock returns, and market efftctency, Journal of Financtal Economics 6. 256296. Fama, E. and J. MacBeth, 1973, Risk, return and equilibrium: Emprrical tests, Journal of Political Economy 71, May/June, 606636. Fama, E., L. Fisher, M. Jensen and R. Roll, 1969, The adjustment of stock prices to new mformation, International Economic Review 10, 1-21.
WD. Nichols and S.L. Brown, Earnings and split information
315
Nichols, W., 1978, An empirical study of stock splits and stock dividends, their accountmg treatment and the market’s perception of their economic value, D.B.A. dissertation (Florida State University, Tallahassee, FL). Patell, J. and M. Wolfson, 1979, The timing of financial accountmg disclosures and the intraday distribution of security price changes, Unpublished paper (Graduate School of Business, Stanford University, Stanford, CA). Watts, R., 1978, Systematic ‘abnormal’ returns after quarterly earnings announcements, Journal of Financial Economics 6, 127-150.