The Accounting Review Vol. 62 No. 4 1987
The Incremental Information Content of Historical Cost and Current Cost Income Numbers: Time-Series Analyses for 1962-1980.
Abstract
Previous investigations of the incremental information content of current cost Income have focused on cross-sectional analyses, which assume that the relation between stock returns and specific price-level adjustments is the same for all firms. Beaver et al. [1982] suggest that such analyses may be misspecified and provide preliminary indications that the Incremental information content of current cost Income may be more evident in a time-series context. The study summarized here provides the first formal examination of the information content of current cost income and historical cost Income within a time-series context. Some evidence of Incremental information content in current cost income is found in the time-series analysis, even though none is evident in a cross-sectional analysis. However, incremental Information content is (at best) evident only for a small subset of industries where the correlation between historical cost income and current cost income is low; for the majority of industries, the two income measures convey essentially the same information.
- DOI
- 10.2308/tar-4487028
- Volume
- 62
- Issue
- 4
- Pages
- 707-722
- Language
- en
- Sources
- openalex crossref