Which of the following is not a finding or conclusion of the research study by ou and penman that used traditional accounting measure to predict whether a company's income would increase or decrease?

a. The researchers were unable to describe the following year earnings changes correctly in most cases.

b. Markets are not as efficient as efficient-market advocates would like to believe.

c. Better accounting standards might improve the predictive ability of accounting information.

d. Fundamental analysis is still important for investment purposes.

Question

Business

Monique Knapp

7 October, 07:55

Which of the following is not a finding or conclusion of the research study by ou and penman that used traditional accounting measure to predict whether a company's income would increase or decrease?

a. The researchers were unable to describe the following year earnings changes correctly in most cases.

b. Markets are not as efficient as efficient-market advocates would like to believe.

c. Better accounting standards might improve the predictive ability of accounting information.

d. Fundamental analysis is still important for investment purposes.

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Answers (1)

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Jadyn Gentry · Answer 1

Answer: a. The researchers were unable to describe the following year earnings changes correctly in most cases.

Explanation:

It was long believed and shown by the works of researchers before Jane Ou and Stephen Penman that the price and performance of stock prices can be used to predict the direction that earnings would take. They attributed this to the fact that stock prices have off information about how the company would perform and by extension how much earnings it would make.

Ou and Penman expanded on this research by showing that the information that the stock prices had was already inside the financial statements of the company. As such they were able to describe the earnings changes in the coming period.