Uncertain precision and price reactions to information
Article Abstract:
A model that extends the common linear rational expectations framework through the introduction of uncertainty regarding the precision of information is presented. This model demonstrates the impact of information on security prices when precision of information is uncertain. Price reaction to information is neither linear nor monotonic when there is uncertainty regarding precision because the market changes its expectation about the precision based on the signal realization. If the basic information structure is conditionally multivariate normal, the price response is nonlinear with the average response falling in the absolute magnitude of surprise because the market links lower precision to extreme news. If distribution is made in the form of a gamma, the returns function in each quadrant is unimodal and negatively sloped at its ends. Nonlinearity rises in the ex ante uncertainty about asset value and precision.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1996
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The impact of SEC mandated segment data on price variability and divergence of beliefs
Article Abstract:
The SEC in 1970 required that the 10-K reports of publicly traded multi-segment firms contain segment revenue and income for those segments contributing a minimum of 10% of income to the consolidated revenues and income. Previous research has indicated that the segment data mandated by the SEC improved earnings forecasts and reduced systematic risk but had no affect on securities prices. Research into the affect of SEC mandated segment data was conducted to ascertain securities price variability around the time of the release of the first 10-K reports in 1970. Research results reveal that price variability was higher than around the time of the release of 10K reports in 1969, and there was a lower divergence of beliefs in the earnings forecasts of financial analysts in May 1971 than in May 1970 for the experimental group but not for the control group.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1991
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Early evidence on the informativeness of the SEC's market risk disclosures: the case of commodity price risk exposure of oil and gas producers
Article Abstract:
Early confirmations on the informativeness of commodity price risk regulations by the SEC'S new market risk disclosure rules are presented. Existing disclosures of oil and gas producers are used to obtain proxies for the tabular and sensitivity analysis disclosures demanded by the new SEC rules. Findings indicated that proxies for the tabular and the sensitivity analysis format are significantly related to the companies' stock return sensitivities to oil and gas price changes. This finding does not agree with the views that the new market disclosures do not reflect the companies' risk exposures. Disclosures from one disclosure format are not similar to those from the other reporting format.
Publication Name: Accounting Review
Subject: Business, general
ISSN: 0001-4826
Year: 1999
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