fi'nor, )"4 4r rrrunAn 7 r/1eary ( a"/?

-)
(,),,t/h-a/r?. 9,.+L \
Figure 5,3 Abnormal Returns for GN and BN Firms
1.12

-12

-10

-6

-4

-2

+2

+4

+(

Month Relative to Annual Report Announcement Date

Source: Ray Ball and P 8rown, "An Ernpir cal Evaluation ofAccounting lncome NLimbers,"

Journal af Accounting Reearch

(AJtLmn 1968). o. 169. Reprinred by permis.ion.

The upper part of Figure 5.3 shows cumulative average abnormal retums for the GN
eamings announcement firms in the sample; the bottom part shows the same for the BN
announcement firms. As can be seen, the GN firms strongly ouqrerformed the total sample (the total sample approximates the market.wide retum), and the BN firrns strongly
underperformed, over the 11-month period leading up to the month of eamings release.

5.3.2 Causation Versus Association

Note that the retums arc cumulative inthe diagram. While there was a substantial increase
(for GN) and decrease (for BN) in average abnormal retums in the narrow window

150 Chapter