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SUMMARY:Estimating the Private Value of Financial Statement Statistics\; t
 he abstract is below.  I hope to have a revised version ready closer to th
 e actual presentation date. - Prof. Russell Lundholm (University of Britis
 h Columbia)
DTSTART:20240613T120000Z
DTEND:20240613T130000Z
UID:TALK205768@talks.cam.ac.uk
CONTACT:CERF/CF Admin
DESCRIPTION:We develop a method for estimating the private value of knowin
 g the future realization of some financial statistic and then apply the me
 asure to the familiar ratios arising from the Dupont decomposition of retu
 rn on equity. The estimation is grounded in the standard rational expectat
 ions model\, adapted to accommodate relative risk aversion\, and produces 
 an investor’s willingness to pay for the signal. The method can accommod
 ate different levels of investable wealth\, multiple assets\, and any info
 rmation system that produces signals about those assets. To illustrate the
  use of this measure\, we show that knowing next year’s return on equity
 \, given that the investor already knows the current value\, is worth six 
 times more than knowing the value of next year’s sales growth. And\, as 
 predicted by the Dupont model\, we find the value of knowing next year’s
  operating asset turnover depends crucially on the level of the operating 
 profit margin. Finally\, we show that knowing next year’s leverage is pr
 actically worthless. Given that investors face trade-offs when deciding wh
 ere to expend effort in financial statement analysis\, these estimates can
  help them to know where to allocate their time.
LOCATION:W4.05
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