The Declining of Earnings Response Coefficient Due to Noise Effects

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AHMADIAN VAHID; ETEMADI HOSSEIN; AGHAEI MOHAMMAD ALI; MEHREGAN NADER

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Journal: The Financial Accounting and Auditing Researches Year:2021 | Volume:12 | Issue:48 Page(s): 1-22

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Title

The Declining of Earnings Response Coefficient Due to Noise Effects

Author(s)

AHMADIAN VAHID | ETEMADI HOSSEIN | AGHAEI MOHAMMAD ALI | MEHREGAN NADER | Issue Writer Certificate

Keywords

EarningQ3

Stock ReturnQ2

R-squaredQ1

Noise in Stock ReturnsQ1

Usefulness of Accounting InformationQ2

Abstract

Most of the studies investigated the relationship between accounting information and market value have emphasized on reduced value relevance of accounting information, especially Earnings. In reviewing these studies, there is a pre-assumption that market price is an appropriate alternative to the value of stocks; a claim which, based on many researches, may lead to wrong inferring in concluding based on this type of studies. Much evidence has been reported in previous studies indicating that market reaction to reported information, including accounting information, is not appropriate and the market, at least in the short term, does not react the effects of new information rightly. This issue might be involved in reducing the Usefulness of Accounting Information. In order to test the reducingdriversof the correlation of Earnings with Stock Returns, in this research, the time trend of variations in the correlation of accounting earrings with Stock Returns was investigated and the share of each of these two variables was tested in variations in this relationship. The experimental results obtained from the review of the 15-year period of research suggest that the explaining power of accounting Earnings has been reduced significantly over time, but this reduction was due to a noise in the Stock Returns, which this feature of Stock Returns increased during the research period. While noise in the Earnings is a factor for reducing the correlation between two variables, but its effects is not statistically significant and the trend of variations has been reduced over time.

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APA: Copy

AHMADIAN, VAHID, ETEMADI, HOSSEIN, AGHAEI, MOHAMMAD ALI, & MEHREGAN, NADER. (2021). The Declining of Earnings Response Coefficient Due to Noise Effects. THE FINANCIAL ACCOUNTING AND AUDITING RESEARCHES, 12(48 ), 1-22. SID. https://sid.ir/paper/398295/en

Vancouver: Copy

AHMADIAN VAHID, ETEMADI HOSSEIN, AGHAEI MOHAMMAD ALI, MEHREGAN NADER. The Declining of Earnings Response Coefficient Due to Noise Effects. THE FINANCIAL ACCOUNTING AND AUDITING RESEARCHES[Internet]. 2021;12(48 ):1-22. Available from: https://sid.ir/paper/398295/en

IEEE: Copy

VAHID AHMADIAN, HOSSEIN ETEMADI, MOHAMMAD ALI AGHAEI, and NADER MEHREGAN, “The Declining of Earnings Response Coefficient Due to Noise Effects,” THE FINANCIAL ACCOUNTING AND AUDITING RESEARCHES, vol. 12, no. 48 , pp. 1–22, 2021, [Online]. Available: https://sid.ir/paper/398295/en

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