Nichols and Wahlen's 2004 study showed that superior forecasting provides the potential to earn superior security returns.Nichols and Wahlen's findings indicate:
A) that an investor could earn excess returns if the investor could predict accurately the sign of the change in earnings one year ahead.
B) that an investor could earn excess returns if the investor could predict accurately the magnitude of the change in earnings one year ahead.
C) that an investor could earn excess returns if the investor could predict accurately the sign of the change in cash flows from operations one year ahead.
D) that an investor could earn excess returns if the investor could predict accurately the sign of the change in working capital one year ahead.

Question

Quizplus · Accepted Answer

Nichols and Wahlen's study showed that accurate forecasting of the sign of the change in earnings one year ahead provides the potential to earn superior security returns. There is no evidence to suggest that accurate forecasting of the other variables mentioned in the answer choices would lead to excess returns.

Nichols and Wahlen's 2004 Study Showed That Superior Forecasting Provides