A New Improvement to the Ohlson (1995) Model: Empirical Evidence from Japan

60 Pages Posted: 13 Oct 2000

See all articles by Koji Ota

Koji Ota

Musashi University - Department of Finance

Date Written: September 15, 2000

Abstract

This paper investigates the validity of the Ohlson (1995) information dynamics (Linear Information Model: LIM) and attempts to improve LIM. The difficulty concerning the empirical tests on LIM lies in identifying v, which denotes information other than abnormal earnings. Recent papers, such as Myers (1999), Hands and Landsman (1999), and Barth et al. (1999), all try to specify v by using various accounting information. Instead of tackling this difficult task, I circumvent it by dealing with serial correlation of the error terms that will be caused by omitting a necessary variable v from the regression equation. The results indicate it leads to the improvement on LIM.

Key Words: Ohlson (1995) model; Information dynamics; Other information vt; Serial correlation; Durbin's alternative test; GLS

JEL Classification: M41, G12

Suggested Citation

Ota, Koji, A New Improvement to the Ohlson (1995) Model: Empirical Evidence from Japan (September 15, 2000). Available at SSRN: https://ssrn.com/abstract=232672 or http://dx.doi.org/10.2139/ssrn.232672

Koji Ota (Contact Author)

Musashi University - Department of Finance ( email )

1-26-1 Toyotamakami
Nerima Tokyo, 1768534
Japan
+81-359843754 (Phone)

HOME PAGE: http://homepage2.nifty.com/koji_ota/

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