C. Catherine Chiang, assistant professor of accounting in the Love School of Business, recently published an article, “Measuring the Usefulness of Information for Investors’ Inference – the Case of Quarterly Earnings Announcements,” in the July 2010 issue of Journal of Business and Economic Research.
The study is co-authored with Yaw M. Mensah, the senior associate dean of the School of Business at Rutgers University. In their paper, Chiang and Mensah propose a new method of measuring the usefulness of information by estimating how efficaciously a piece of information enables investors to draw correct inferences regarding a firm’s future financial performance. Their empirical findings, using stock market data from 1985 to 2005, suggest that investors are able to make more informative inference about a firm’s future profitability based on quarterly earnings announcements than based on other information. The study also finds that, in general, investors do not correctly anticipate future losses.
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