An Evaluation of Alternative Proxies for the Market's Assessment of Unexpected Earnings

35 Pages Posted: 18 Apr 2008

See all articles by Lawrence D. Brown

Lawrence D. Brown

Temple University - Department of Accounting

Robert Hagerman

SUNY at Buffalo - School of Management

Paul A. Griffin

University of California, Davis - Graduate School of Management; University of California, Davis

Mark Zmijewski

University of Chicago - Accounting

Abstract

This study examines the association between abnormal returns and five alternative proxies for the market's assessment of unexpected quarterly earnings. We examine the role that measurement error potentially has in multiple regression tests of abnormal returns (occurring around the time of earnings announcements) on an unexpected earnings proxy and other non-earnings variables. The results indicate a potential measurement error interpretation of such multiple regression tests. We examine three procedures which reduce, to an unknown degree, the measurement error problem. Our procedures appear to be more (less) effective at reducing measurement error for small (large) firms and recent (non-recent) forecasts.

Suggested Citation

Brown, Lawrence D. and Hagerman, Robert and Griffin, Paul A. and Zmijewski, Mark, An Evaluation of Alternative Proxies for the Market's Assessment of Unexpected Earnings. Journal of Accounting & Economics, Vol. 9, No. 2, 1987. Available at SSRN: https://ssrn.com/abstract=1121406

Lawrence D. Brown (Contact Author)

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States

Robert Hagerman

SUNY at Buffalo - School of Management ( email )

Jacobs Management Center
Buffalo, NY 14260
United States

Paul A. Griffin

University of California, Davis - Graduate School of Management ( email )

3102 Gallahger Hall
Davis, CA 95616
United States
(530) 752-7372 (Phone)
(425) 799-4143 (Fax)

HOME PAGE: http://www.gsm.ucdavis.edu/griffin/

University of California, Davis ( email )

3102 Gallahger Hall
Davis, CA 95616
United States
(530) 752-7372 (Phone)
(425) 799-4143 (Fax)

HOME PAGE: http://www.gsm.ucdavis.edu/griffin/

Mark Zmijewski

University of Chicago - Accounting ( email )

1101 East 58th Street
Chicago, IL 60637-1561
United States

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