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An empirical evaluation of accounting income numbers
Ray Ball,Philip Brown +1 more
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In this article, it is argued that income numbers cannot be defined substantively, that they lack "meaning" and are therefore of doubtful utility, and the argument stems in part from the patchwork development of account-based theories.Abstract:
Accounting theorists have generally evaluated the usefulness of accounting practices by the extent of their agreement with a particular analytic model. The model may consist of only a few assertions or it may be a rigorously developed argument. In each case, the method of evaluation has been to compare existing practices with the more preferable practices implied by the model or with some standard which the model implies all practices should possess. The shortcoming of this method is that it ignores a significant source of knowledge of the world, namely, the extent to which the predictions of the model conform to observed behavior. It is not enough to defend an analytical inquiry on the basis that its assumptions are empirically supportable, for how is one to know that a theory embraces all of the relevant supportable assumptions? And how does one explain the predictive powers of propositions which are based on unverifiable assumptions such as the maximization of utility functions? Further, how is one to resolve differences between propositions which arise from considering different aspects of the world? The limitations of a completely analytical approach to usefulness are illustrated by the argument that income numbers cannot be defined substantively, that they lack "meaning" and are therefore of doubtful utility.' The argument stems in part from the patchwork development of account-read more
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Efficient capital markets: a review of theory and empirical work*
TL;DR: Efficient Capital Markets: A Review of Theory and Empirical Work Author(s): Eugene Fama Source: The Journal of Finance, Vol. 25, No. 2, Papers and Proceedings of the Twenty-Eighth Annual Meeting of the American Finance Association New York, N.Y. December, 28-30, 1969 (May, 1970), pp. 383-417 as mentioned in this paper
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Using daily stock returns: The case of event studies
TL;DR: In this paper, the authors examine properties of daily stock returns and how the particular characteristics of these data affect event study methodologies and show that recognition of autocorrelation in daily excess returns and changes in their variance conditional on an event can sometimes be advantageous.
Journal ArticleDOI
Efficient Capital Markets: II
TL;DR: A review of the market efficiency literature can be found in this article, where the authors discuss the work that they find most interesting, and offer their views on what we have learned from the research on market efficiency.
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Event Studies in Economics and Finance
TL;DR: In this article, event study methods are described including some of the potential complications of the approach, and an example is included to illustrate the approach and to illustrate how the impact of an economic event can be measured by examining security prices surrounding the event.
Journal ArticleDOI
The conservatism principle and the asymmetric timeliness of earnings1
TL;DR: In this paper, the authors interpret conservatism as resulting in earnings reflecting "bad news" more quickly than "good news" and find that negative earnings changes are less persistent than positive earnings changes.
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Capital asset prices: a theory of market equilibrium under conditions of risk*
TL;DR: In this paper, the authors present a body of positive microeconomic theory dealing with conditions of risk, which can be used to predict the behavior of capital marcets under certain conditions.
Journal ArticleDOI
The Adjustment of Stock Prices to New Information
TL;DR: In this paper, the authors examine the process by which common stock prices adjust to the information (if any) that is implicit in a stock split and show that the independence of successive price changes is consistent with a market that adjusts rapidly to new information.
Book
The information content of annual earnings announcements
TL;DR: The authors empirically examined the extent to which common stock investors perceive earnings to possess informational value and found that the earnings term was the most important explanatory variable in the valuation equation, and that the relationship is a necessary condition for earnings to have information content.
Book
The Theory and Measurement of Business Income
Edgar O. Edwards,Philip W. Bell +1 more
TL;DR: In this article, the authors present the most wise and original contribution to accounting theory since Professor Bonbright wrote 'The Valuation of Property' a quarter of a century ago, which is a significant milestone on the road to whatever outcome the future holds.