8/19/2019 Graphs Analysis

1/1

fi'nor,

)"4

4r

rrrunAn

7

r/1eary

(

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9,.+L

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Figure

5,3 Abnormal

Returns

for

GN and

BN

Firms

1.12

-12

-10

-€

-6

-4

-2

O +2

+4

+(

Month

Relative

to Annual Report

Announcement

Date

Source: Ray

Ball

and P 8rown,

"An

Ernpir cal

Evaluation ofAccounting

lncome

NLimbers," Journal

af Accounting

Reearch

(AJtLmn

1968).

o. 169. Reprinred

by

permis.ion.

The

upper

part

of Figure

5.3 shows

cumulative

average

abnormal

retums

for the

GN

eamings

announcement

firms

in

the sample;

the bottom

part

shows

the

same

for

the

BN

announcement

firms.

As can

be seen,

the

GN

firms

strongly

ouqrerformed

the

total

sam-

ple

(the

total

sample approximates

the

market.wide

retum),

and

the BN

firrns

strongly

underperformed,

over

the

11-month

period

leading

up

to the

month

of eamings

release.

5.3.2

Causation

Versus

Association

Note that

the retums

arc cumulative

inthe diagram.

While

there was

a substantial

increase

(for

GN)

and decrease

(for

BN)

in

average

abnormal

retums in

the narrow

window

150

Chapter

5

 

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4

E

o