Chris Olsen, Valuation Implications of SFAS No. 33 Data for Electric Utility Investors, Journal of Accounting Research, Vol. 23, Studies on Accounting Earnings and Security Valuation: Current Research Issues (1985), pp. 28-47

Chris Olsen, J. Richard Dietrich, Vertical Information Transfers: The Association between Retailers' Sales Announcements and Suppliers' Security Returns, Journal of Accounting Research, Vol. 23, Studies on Accounting Earnings and Security Valuation: Current Research Issues (1985), pp. 144-166

[A common finding in the literature is that systematic post-announcement drifts in security returns are associated with the sign or magnitude of unexpected earnings changes. This paper examines proposed explanations for these drifts. The paper also documents that the systematic drifts in security returns are found for only a subset of earnings expectations models. For a class of expectations models based on the time series of reported quarterly earnings, variables coding (1) the sign and magnitude of the earnings forecast error and (2) firm size independently explain 81 percent and 61 percent, respectively, of the variation in post-announcement drifts. The joint explanatory power of (1) and (2) is 85 percent, indicating that the effect of these two variables is highly collinear. The drifts are a persistent phenomenon over the 1974 to 1981 period with no evidence of being concentrated in a specific subperios. The properties of expectations models based on the time series of earnings are contrasted with earnings expectations models based on security returns. The latter exhibit no evidence of systematic post-announcement drift behavior. The expectations models based on security returns have the appealing property that the assignment of firms to unexpected earnings change portfolios better approximates the independence-over-time assumption. This property means that these models are less vulnerable to the "proxy effect" criticism that has been made of results previously reported in the literature. The results in this paper are based on a sample of over 56,000 observations covering the 1974 to 1981 time period.]

Robert B. Thompson II, Chris Olsen, J. Richard Dietrich, Attributes of News about Firms: An Analysis of Firm-Specific News Reported in the Wall Street Journal Index, Journal of Accounting Research, Vol. 25, No. 2 (Autumn, 1987), pp. 245-274

[In many accounting and finance research studies it is hypothesized that the news release under study has valuation implications. Results often indicate that the distribution of risk adjusted residual common stock returns, conditional on the occurrence of a wide variety of specific news event types, differs in one or more moments from the distribution of returns when such events are absent. This paper demonstrates that the distribution of Wall Street Journal news-conditional residual returns differs from the distribution of returns when such news is absent. A "news-conditional" model of the process generating security returns is proposed as an alternative to models typically used in previous event studies. Standardized prediction errors and squared standardized prediction errors from the news-conditional model are compared with those generated by conventional procedures.]

In many accounting and finance research studies it is hypothesized that the news release under study has valuation implications. Results often indicate that the distribution of risk adjusted residual common stock returns, conditional on the occurrence of a wide variety of specific news event types, differs in one or more moments from the distribution of returns when such events are absent. This paper demonstrates that the distribution of Wall Street Journal news-conditional residual returns differs from the distribution of returns when such news is absent. A "news-conditional" model of the process generating security returns is proposed as an alternative to models typically used in previous event studies. Standardized prediction errors and squared standardized prediction errors from the news-conditional model are compared with those generated by conventional procedures.

A common finding in the literature is that systematic post-announcement drifts in security returns are associated with the sign or magnitude of unexpected earnings changes. This paper examines proposed explanations for these drifts. The paper also documents that the systematic drifts in security returns are found for only a subset of earnings expectations models. For a class of expectations models based on the time series of reported quarterly earnings, variables coding (1) the sign and magnitude of the earnings forecast error and (2) firm size independently explain 81 percent and 61 percent, respectively, of the variation in post-announcement drifts. The joint explanatory power of (1) and (2) is 85 percent, indicating that the effect of these two variables is highly collinear. The drifts are a persistent phenomenon over the 1974 to 1981 period with no evidence of being concentrated in a specific subperiod. The properties of expectations models based on the time series of earnings are contrasted with earnings expectations models based on security returns. The latter exhibit no evidence of systematic post-announcement drift behavior. The expectations models based on security returns have the appealing property that the assignment of firms to unexpected earnings change portfolios better approximates the independence-over-time assumption. This property means that these models are less vulnerable to the "proxy effect" criticism that has been made of results previously reported in the literature. The results in this paper are based on a sample of over 56,000 observations covering the 1974 to 1981 time period.