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Test-based measures of school performance are increasingly used to inform both education policy and families’ school choice decisions. There are, however, concerns about the reliability of these measures. This paper assesses the extent to which cross-sectional differences in schools’ average achievement on standardized tests reflect transitory factors, using data from a 1999–2006 panel of public and private schools in British Columbia, Canada. Sampling variation and one-time mean reverting shocks are shown to be significant sources of cross-sectional variation in schools’ mean test scores. The results therefore suggest that public dissemination of information about schools’ average achievement on standardized tests could potentially mislead or confuse parents. These results should also encourage caution in the design of policies that attach monetary or nonmonetary rewards or sanctions to schools on the basis of test-based achievement and suggest a need for more sophisticated measures of school performance.

Noise or News? Learning about the Content of Test-Based School Achievement Measures