Journal article
SEC product-line reporting and market efficiency
Journal of financial economics, Vol.2(2), pp.125-164
06/01/1975
DOI: 10.1016/0304-405X(75)90002-1
Abstract
This study tests the efficiency of the securities market with respect to non-public segment earnings data for 1967–1969 which was first made public by many firms in 1970 SEC 10-K reports. Trading rule strategies are proposed in which segment-based earnings forecasts are compared to consolidated-based forecasts to anticipate ‘unexpected’ changes in earnings. Using the ‘market model’ to eliminate market related movements in security prices, average monthly abnormal returns conditional on this segment-based strategy are estimated for 1968, 1969, and 1970 for two groups of firms: (1) ‘Non-disclosure’ firms that did not publicly report either segment revenue or profit data prior to 1970, and (2) ‘partial disclosure’ firms that publicly reported segment revenue information, but no segment profits, prior to 1970.
The results suggest that the market was not efficient with respect to the non-public segment revenue and profit data of non-disclosure firms for 1968–1969. However, this finding could not be replicated for 1970. The average monthly abnormal returns conditional on the segment-based trading rule strategy were found to be relatively small for the partial disclosure firms. This suggests that segment revenue data can be used to successfully anticipate changes in total entity earnings which would otherwise be ‘unexpected’ if only consolidated data were available.
Details
- Title: Subtitle
- SEC product-line reporting and market efficiency
- Creators
- Daniel W. Collins - Michigan State University
- Resource Type
- Journal article
- Publication Details
- Journal of financial economics, Vol.2(2), pp.125-164
- DOI
- 10.1016/0304-405X(75)90002-1
- ISSN
- 0304-405X
- eISSN
- 1879-2774
- Publisher
- Elsevier B.V
- Number of pages
- 40
- Language
- English
- Date published
- 06/01/1975
- Academic Unit
- Accounting
- Record Identifier
- 9984963046302771
Metrics
1 Record Views