Hostname: page-component-848d4c4894-pftt2 Total loading time: 0 Render date: 2024-06-09T18:02:20.623Z Has data issue: false hasContentIssue false
  • English
  • Français

Evidence on the Information Content of Accounting Numbers: Accounting-based and Market-based Estimates of Systematic Risk

Published online by Cambridge University Press:  19 October 2009

Nicholas J. Gonedes
Get access Rights & Permissions [Opens in a new window]

Extract

There exists a relatively large body of evidence that is consistent with the proposition that the market for securities (in particular, the New York Stock Exchange) is an efficient market in the sense that market prices react instantaneously and unbiasedly to new information and, therefore, market prices fully reflect all publicly available information. To what extent do accounting numbers reflect the kinds of information reflected in market prices? One might not, of course, expect accounting numbers to reflect all events reflected in current market prices. For example, if an economically significant piece of legislation is under discussion in, say, the United States Senate, then the expected effects (if any) of this legislation may be impounded in current market prices. One should not, however, expect these effects (if any) to be reflected in currently issued accounting numbers because of the nature of accepted accounting procedures. Yet, in general, over a period of time, there may be a systematic correspondence between some types of events reflected in market prices and accounting numbers. That is, over time, there may be a correlation between the information impounded in market prices and that impounded in accounting numbers.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 8 , Issue 3 , June 1973 , pp. 407 - 443
Copyright
Copyright © School of Business Administration, University of Washington 1973

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

[1]Ball, R., and Brown, P.. “An Empirical Evaluation of Accounting Income Numbers.” Journal of Accounting Research, Autumn 1968, pp. 159–178.CrossRefGoogle Scholar
[2]Ball, R., and Brown, P.. “Portfolio Theory and Accounting.” Journal of Accounting Research, Autumn 1969, pp. 300–323.CrossRefGoogle Scholar
[3]Beaver, William H. “The Information Content of Annual Earnings Announcements.” Empirical Research in Accounting; Selected Studies, 1968, Supplement to the Journal of Accounting Research, vol. 6, pp. 67–92.Google Scholar
[4]Beaver, William H.; Kettler, P.; and Scholes, M.. “The Association Between Market Determined and Accounting Determined Risk Measures.” Accounting Review, October 1970, pp. 654–682.Google Scholar
[5]Benston, G. “Published Accounting Data and Stock Prices.” Empirical Research in Accounting; Selected Studies, 1967, Supplement to the Journal of Accounting Research, vol. 5, pp. 1–54.Google Scholar
[6]Blattberg, R., and Sargent, T.. “Regression with Non-Gaussian Disturbances: Some Sampling Results.” Econometrica, May 1971, pp. 501–510.CrossRefGoogle Scholar
[7]Blume, M. “Portfolio Theory: A Step Toward Its Practical Application.” Journal of Business, April 1970.Google Scholar
[8]Blume, M. “On the Assessment of Risk.” Unpublished manuscript, February 1970. Forthcoming in Journal of Finance.Google Scholar
[9]Brealey, R. A.An Introduction to Risk and Return from Common Stocks. Cambridge, Mass.: The M. I. T. Press, 1969.Google Scholar
[10]Brown, P., and Ball, R.. “Some Preliminary Findings on the Association Between the Earnings of a Firm, Its Industry, and the Economy.” Empirical Research in Accounting; Selected Studies, 1967, Supplement to the Journal of Accounting Research, vol. 6, pp. 55–77.Google Scholar
[11]Cochran, W. G. “Some Effects of Errors of Measurement on Multiple Correlation.” Journal of the American Statistical Association, March 1970, pp. 22–34.CrossRefGoogle Scholar
[12]Fama, Eugene F. “The Behavior of Stock Market Prices.” Journal of Business, January 1965, pp. 34–105.Google Scholar
[13]Fama, Eugene F. “Risk Return and Equilibrium: Some Clarifying Comments.” Journal of Finance, March 1968, pp. 29–40.Google Scholar
[14]Fama, Eugene F. “Efficient Capital Markets: A Review of Theory and Empirical Work.” Journal of Finance, May 1970, pp. 383–417.Google Scholar
[15]Fama, Eugene F. “Risk, Return and Equilibrium.” Journal of Political Economy, January/February 1971, pp. 30–55.CrossRefGoogle Scholar
[16]Fama, Eugene F.; Fisher, L.; Jensen, M. C.; and Roll, Richard. “The Adjustment of Stock Prices to New Information.” International Economic Review, February 1969, pp. 1–21.Google Scholar
[17]Fisher, Lawrence. “Some New Stock Market Indices.” Journal of Business, part 2, January 1966, pp. 191–225.Google Scholar
[18]Fisher, Lawrence. “The Estimation of Systematic Risk: Some New Findings.” In preparation; preliminary results discussed at the Seminar on the Analysis of Security Prices, University of Chicago, May 1970.Google Scholar
[19]Glejser, H. “A New Test for Heteroscedasticity.” Journal of the American Statistical Association, March 1969, pp. 316–323.Google Scholar
[20]Goldberger, A. S.Econometric Theory. New York: John Wiley & Sons, 1964.Google Scholar
[21]Gonedes, Nicholas J. “The Significance of Selected Accounting Procedures: A Statistical Test.” Empirical Research in Accounting, Selected Studies, 1969, Supplement to the Journal of Accounting Research, vol. 7, pp. 90–113.Google Scholar
[22]Gonedes, Nicholas J. “Some Evidence on Investor Actions and Accounting Messages.” Accounting Review, parts 1 and 2, April and July 1971.Google Scholar
[23]Gonedes, Nicholas J.“Evidence on the Information Content of Accounting Numbers: Accounting-Based and Market-Based Estimates of Systematic Risk.”Report No. 7115, Center for Mathematical Studies in Business and Economics,University of Chicago,March 1971.Google Scholar
[24]Gonedes, Nicholas J. “Efficient Markets and External Accounting.” Accounting Review, January 1972, pp. 11–21.Google Scholar
[25]Gonedes, Nicholas J.“Properties of Accounting Numbers: Models and Tests.”Report No. 7202, Center for Mathematical Studies in Business and Economics,University of Chicago, 1972.Google Scholar
[26]Jensen, M. C. “Risk, the Pricing of Capital Assets, and the Evaluation of Investment Portfolios.” Journal of Business, April 1969, pp. 167–247.Google Scholar
[27]Kendall, M. G., and Stuart, A.. The Advanced Theory of Statistics, vol. 2. Hafner Publishing Co., 1967.Google Scholar
[28]King, Benjamin F. “Market and Industry Factors in Stock Price Behavior.” Journal of Business, January 1966, pp. 139–190.CrossRefGoogle Scholar
[29]Kuh, E., and Meyer, J. R.. “Correlation and Regression Estimates When the Data are Ratios.” Econometrica, October 1965, pp. 400–416.CrossRefGoogle Scholar
[30]Lintner, John. “The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets.” Review of Economics and Statistics, February 1965, pp. 13–37.CrossRefGoogle Scholar
[31]Lintner, John. “Security Prices, Risk, and Maximal Gains from Diversification.” Journal of Finance, December 1965, pp. 587–615.Google Scholar
[32]Lintner, John. “The Aggregation of Investors' Diverse Judgments and Preferences in Purely Competitive Security Markets.” Journal of Financial and Quantitative Analysis, December 1969, pp. 347–400.Google Scholar
[33]Madansky, A. “Spurious Correlation Due to Deflating Variables.” Econometrica, October 1964, pp. 652–655.Google Scholar
[34]Markowitz, H. M.Portfolio Selection. New York: John Wiley and Sons, 1959.Google Scholar
[35]Miller, M. H., and Scholes, M.. “Rates of Return in Relation to Risk: A Reexamination of Some Recent Findings.”Report No. 7035, Center for Mathematical Studies in Business and Economics,University of Chicago,August 1970.Google Scholar
[36]Mood, A. M., and Graybill, F. M.. Introduction to the Theory of Statistics. New York: McGraw-Hill, 1963.Google Scholar
[37]Officer, R. R. “Time Series Examination of the Risks Implied by the Market Model.” Unpublished manuscript, University of Chicago, August 1970.Google Scholar
[38]Park, R. E. “Estimation With Heteroscedastic Error Terms.” Econometrica, October 1966, p. 888.Google Scholar
[39]Pearson, Karl. “On a Form of Spurious Correlation Which May Arise When Indices Are Used in the Measurement of Organs.” Proceedings of the Royal Society of London, vol. 60, 1897, pp. 489–498.Google Scholar
[40]Sharpe, William F. “A Simplified Model for Portfolio Analysis.” Management Science, January 1963, pp. 277–293.Google Scholar
[41]Sharpe, William F. “Capital Asset Prices: A Theory of Market Equilibrium Under Conditions of Risk.” Journal of Finance, September 1964, pp. 425–442.Google Scholar
[42]Sharpe, William F.Portfolio Theory and Capital Markets. New York: McGraw-Hill, 1970.Google Scholar
[43]Wise, John. “Linear Estimators for Linear Regression Systems Having Infinite Residual Variances.” Unpublished manuscript, 1966.Google Scholar