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Intra-Year Trends in the Degree of Association Between Accounting Numbers and Security Prices.

Senyo Y. Tse
The Accounting Review 1986 61(3), 475-497
Abstract ABSTRACT: This study uses two representative cross-sectional valuation models to examine trends in the explanatory power of given sets of financial data for security prices. The primary objective is to examine joint hypotheses on the validity of valuation models and the manner in which financial statement data are assimilated into the information set reflected in prices, and subsequently replaced by other data. The observed trends support the informativeness trend hypotheses, suggesting that the valuation models studied capture important elements of the security pricing relationship. An examination of intra-year movements showed substantial variation around the trends, suggesting the presence of temporary influences on model explanatory power. Possible explanations for these phenomena are offered.

The Effect of Task Predictability and Prior Probability Disclosure on Judgment Quality and Confidence.

Cornelius Casey; Thomas I. Selling
The Accounting Review 1986 61(2), 302-317
Abstract ABSTRACT: Seventy-one second-year MBA students participated in a computer-based laboratory experiment involving bankruptcy prediction. The study tested for main and interaction effects of variation in task predictability and disclosure of the prior probability of bankruptcy on subjects' predictive accuracy and related confidence levels. As hypothesized, task predictability was significantly and positively related to predictive accuracy. The main effect of disclosure of the prior probability of bankruptcy was not significant, but its interaction effect with task predictability was significant when accuracy rates for bankrupt and nonbankrupt firms were analyzed separately. In particular, disclosure of the prior probability to subjects in the low task predictability condition resulted in a significant Improvement in their predictive accuracy. Subjects in all treatment groups were overconfident about their predictive accuracy, with subjects in the low task predictability condition significantly more overconfident than subjects in the high task predictability condition.