Hostname: page-component-586b7cd67f-l7hp2 Total loading time: 0 Render date: 2024-11-22T05:44:21.921Z Has data issue: false hasContentIssue false
  • English
  • Français

Efficient Capital Markets and the Information Content of Accounting Numbers

Published online by Cambridge University Press:  19 October 2009

John T. Emery
Get access Rights & Permissions [Opens in a new window]

Extract

The theory of efficient capital markets suggests that if the capital markets are efficient, security prices can be assumed at any time to “fully reflect” all available information. Various forms of the model have been subjected to extensive empirical testing. The results of these tests have been such that in reviewing the literature on the theory Fama [3] states, “ … the evidence in support of the efficient markets model is extensive, and (somewhat uniquely in economics) contradictory evidence is sparse.” Most of the research, however, has been addressed to the question of whether prices “fully reflect” particular subsets of available information. The validity of these results depends on the extent to which the information in the subset used for testing captures the information actually impounded in prices.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 9 , Issue 2 , March 1974 , pp. 139 - 149
Copyright
Copyright © School of Business Administration, University of Washington 1974

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

REFERENCES

[1]Copeland, R. M. “Income Smoothing.” Empirical Research in Accounting: Selected Studies, Supplement to vol. 6 (1968). Journal of Accounting Research, pp. 101–116.CrossRefGoogle Scholar
[2]Dascher, Paul E., and Malcom, Robert E.. “A Note on Income Smoothing in the Chemical Industry.” Journal of Accounting Research, Autumn 1970, pp. 253–259.CrossRefGoogle Scholar
[3]Fama, Eugene F. “Efficient Capital Markets: A Review of Theory and Empirical Work.” Journal of Finance, May 1970, pp. 383–417.CrossRefGoogle Scholar
[4]Gonedes, Nicholas J. “Efficient Capital Markets and External Accounting.” The Accounting Review, January 1973, pp. 11–21.Google Scholar
[5]Gonedes, Nicholas J. “Income-smoothing Behavior under Selected Stochastic Processes.” The Journal of Business, October 1972, pp. 570–584.CrossRefGoogle Scholar
[6]Gordon, M. J.; Horwitz, B. N.; and Meyers, P. T.. “Accounting Measurements and Normal Growth of the Firm.” In Research in Accounting Measurement, edited by Ijiri, Jaedicke, and Nielsen, . American Accounting Association, 1966, pp. 221–231.Google Scholar
[7]Ijiri, Y.; Jaedicke, R.; and Knight, K.. “The Effects of Accounting Alternatives on Management Decisions.” Research in Accounting Measurement. American Accounting Association, 1966, pp. 186–199.Google Scholar
[8]Kaplan, Robert, and Roll, Richard. “Accounting Changes and Stock Prices.” Financial Analysts Journal, January–February 1973, pp. 43–53.Google Scholar
[9]Kaplan, Robert S., and Roll, Richard. “Investor Evaluation of Accounting Information: Some Empirical Evidence.” The Journal of Business, April 1972, pp. 225–257.CrossRefGoogle Scholar
[10]Niederhoffer, Victor, and Osborne, M. F. M.. “Market Making and Reversal on the New York Stock Exchange.” Journal of the American Statistical Association, December 1966, pp. 897–916.CrossRefGoogle Scholar
[11]Scholes, Myron. “A Test of the Competitive Market Hypothesis: The Market for New Issues and Secondary Offerings.” Unpublished Ph.D. dissertation, University of Chicago.Google Scholar
[12]White, Gary E. “Discretionary Accounting Decisions and Income Normalization.” Journal of Accounting Research, Autumn 1970, pp. 260–273.CrossRefGoogle Scholar