Across‐sample Incomparability of R2s and Additional Evidence on Value Relevance Changes Over Time

Zhaoyang Gu

Journal of Business Finance & Accounting, 2007, vol. 34, issue 7‐8, 1073-1098

Abstract: Abstract: Given the increasing popularity of across‐sample R2 comparisons in accounting research, this paper illustrates why the regression R2s are incomparable across samples and the general nature of this problem. The regression residual dispersion with proper control for scale is proposed as the alternative measure of explanatory power for across‐sample comparisons. In market‐on‐accounting variable regressions, this measure can be conveniently interpreted as the degree of accounting‐based pricing errors and be used as a measure of value relevance of accounting information. As an application, the issue of over‐time value relevance changes is re‐visited. In contrast to prior mixed findings based on the R2 measure, a decline of value relevance since the early 1970s is robustly detected using the alternative measure.

Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
https://doi.org/10.1111/j.1468-5957.2007.02044.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jbfnac:v:34:y:2007:i:7-8:p:1073-1098

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0306-686X

Access Statistics for this article

Journal of Business Finance & Accounting is currently edited by P. F. Pope, A. W. Stark and M. Walker

More articles in Journal of Business Finance & Accounting from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().