The Relation between Stock Prices and Accounting Information

The Relation between Stock Prices and Accounting Information The functional relation between expected stock prices and accounting information is analyzed through the theory of inverse probability. The approach models the mean of the posterior distribution for price, given the information that the accounting process provides. The implications of alternative assumptions about accounting measurement error and the unconditional price distribution are discussed. Our most refined model is consistent with recent empirical evidence showing convexity in the relationship between price and accounting information. Empirical tests, while exploratory, provide further evidence of a nonlinear relation between stock price and accounting measures of earnings and book value. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

The Relation between Stock Prices and Accounting Information

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 1998 by Kluwer Academic Publishers
Subject
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
ISSN
1380-6653
eISSN
1573-7136
D.O.I.
10.1023/A:1018663519739
Publisher site
See Article on Publisher Site

References

  • The Conservatism Principle and the Asymmetric Timeliness of Earnings
    Basu, S.

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