THE ASSOCIATION BETWEEN COMMON STOCK RETURNS AND ALTERNATIVE PROFITABILITY MEASURES OF CANADIAN COMPANIES

This study examines whether non‐historic income measures disclosed by a sample of Canadian firms convey information that is relevant to the evaluation of their performance. The sample firms were partitioned into several portfolios based on two firm‐specific measures which are assumed to capture input cost increases and the firm's ability to pass these increases on to its customers via higher output prices. Several groupings of the firms were performed based on various measures of non‐historic income. In general, the results of this study provide support for an association between market returns on common stock and non‐historic income measures.