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Title: Financial statement information and stock returns
Author: Setiono, Bambang
Awarding Body: University of Manchester
Current Institution: University of Manchester
Date of Award: 1996
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This research investigates the relation between stock returns and financial statement information. There are two main objectives of this research. The first objective is to investigate the ability of financial statement information to predict stock returns. The second objective is to investigate the degree to which the UK stock market anticipates or reacts with a delay to earnings, book value, and other nonearnings information. There are two prediction analyses performed in this study: indirect prediction of stock returns via earnings and direct prediction of stock returns. Using the indirect prediction approach, this research obtains trading profits (abnormal returns) between 7.16 percent and 19.71 percent for a 24 months holding period, depending on the specific measure of abnormal return and weighting scheme involved. Using the direct prediction approach, this study obtains trading profits between 2.02 percent and 3.43 percent for 12 months holding periods and between 2.42 percent and 5.01 percent for 24 months holding periods. Even though the direct prediction approach earns smaller and less significant trading profits, size and book-to-market effects as well as a control for time varying risk cannot explain the abnormal returns from the trading strategy. In contrast, controlling for time varying risk and size might explain the abnormal returns obtained from the indirect prediction approach. This research finds evidence of market anticipation as well as delayed reaction to earnings, book value, and other nonearnings information. The degree of market anticipation and delayed reaction to accounting information are related to market capitalization. There is more evidence of market anticipation to earnings from large firms than to earnings from small firms. On the other hand, there is more evidence of market anticipation to book values from small firms than to book values from large firms. In general, this research finds the degree of delayed market reaction to nonearnings information is higher than the degree of market anticipation of nonearnings information. However, by and large, the delayed market reaction to this nonearnings information is observed more for small firms.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available