Disentangling Relevance from Reliability in Value Relevance Tests

The literature shows that during the COVID-19 pandemic, value relevance of earnings decreased. Traditionally, measures using relationship between stock returns and earnings. However, these tests are, in fact, “joint reliability”. This caveat can distort measurement relevance, especially pandemic where exceptional level uncertainty could have affected reliability to different extents. study disentangles by extending test. We use this extended test examine firm categories two dimensions: profits versus losses intensive scarce accounting estimates. results show are complementary when both sufficiently high, but has no significant impact on usefulness is weak.