The Information Content of General Price Level Adjusted Earnings: A Comment.

Bruce A. Samuelson; Brock Murdoch

doi:10.2308/tar-4491877

The Information Content of General Price Level Adjusted Earnings: A Comment.

Bruce A. Samuelson¹; Brock Murdoch²

¹ Associate Professor of Accounting, Pepperdine University. 1 · ² Associate Professor of Accounting, California State University, Chico. 2

The Accounting Review 1985

Abstract ABSTRACT: Baran, Lakonishok, and Ofer [1980] present some empirical evidence on the information content of general price-level adjusted (GPL) earnings relative to historical cost (HC) earnings. Their statistical tests are shown to be invalid, thus leaving unsupported their main conclusion-GPL earnings are superior. We apply an appropriate statistical test to their data and find contrasting results: GPL betas exhibit significantly better correlation with market betas than do HC betas for market value-denominated betas, but not for a non-market-denominated β. No conclusion can be rendered on the information content of GPL earnings, and the controversy over accounting β construction is rejoined.

DOI: 10.2308/tar-4491877
Volume: 60 (4)
Pages: 706-710
Language: en
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