Center for Advanced Management

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Prof. Steven Huddart (Pennsylvania State University)


Datum: 26. Juni 2018

Zeit: 17.00 - 18.30 Uhr

Ort: Schackstr. 4, Raum 314

Titel: Reporting System, Investor Learning, and Stock Return Regularities


“We propose a unified framework for understanding the impacts of earnings persistence and earnings informativeness in explaining accounting-based regularities. The underlying states of a firm follow a Markov process and are only imperfectly revealed through signals from a reporting system. Based on the signals, a representative Bayesian investor forms beliefs about the hidden states. Our model delivers predictions that are consistent with several empirical findings on the relationships between accounting reports and stock returns, including market reactions to breaks of earnings strings, and the return predictability based on accruals and book-tax differences. We also conduct simulations to gauge how these regularities vary with two characteristics of the reporting system, informativeness and conservatism.”