Financial Market Data Versus Accounting Data: Which Better Explains Stock Returns?
This paper presents the comparison of how financial market and accounting data affect stock prices and returns. The goal was to ascertain whether financial information or accounting data dominate in evaluating stock prices. Most valuation techniques used by firms are based on models using either acc...
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Veröffentlicht in: | International advances in economic research 2020-02, Vol.26 (1), p.59-72 |
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description | This paper presents the comparison of how financial market and accounting data affect stock prices and returns. The goal was to ascertain whether financial information or accounting data dominate in evaluating stock prices. Most valuation techniques used by firms are based on models using either accounting variables (earnings, book value, cash flows, research and development expenses) or financial market data (e.g. beta, market value, interest). The answer is of great importance for valuators and investors as it will help them focus on the most important variables and make better valuations and choices. This answer is also important for accounting standard setters as the preferred method will serve as an indicator for the quality of financial statements and their importance to users. The paper contributes to the existing literature in the fields of value relevance of accounting information and firm valuation and accounting standards (e.g. International Financial Reporting Standards, United States General Accepted Accounting Principles). To answer this question, share prices were estimated based on financial data using the capital asset pricing model and for accounting data, using Ohlson’s model. The results were tested for both methodologies by comparing estimated share prices with actual ones. The greater the correlation between the two variables the better the explanatory power of the model. The focus was on S&P 500 firms for the period 2002–2017. |
doi_str_mv | 10.1007/s11294-020-09774-4 |
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The goal was to ascertain whether financial information or accounting data dominate in evaluating stock prices. Most valuation techniques used by firms are based on models using either accounting variables (earnings, book value, cash flows, research and development expenses) or financial market data (e.g. beta, market value, interest). The answer is of great importance for valuators and investors as it will help them focus on the most important variables and make better valuations and choices. This answer is also important for accounting standard setters as the preferred method will serve as an indicator for the quality of financial statements and their importance to users. The paper contributes to the existing literature in the fields of value relevance of accounting information and firm valuation and accounting standards (e.g. International Financial Reporting Standards, United States General Accepted Accounting Principles). To answer this question, share prices were estimated based on financial data using the capital asset pricing model and for accounting data, using Ohlson’s model. The results were tested for both methodologies by comparing estimated share prices with actual ones. The greater the correlation between the two variables the better the explanatory power of the model. 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The goal was to ascertain whether financial information or accounting data dominate in evaluating stock prices. Most valuation techniques used by firms are based on models using either accounting variables (earnings, book value, cash flows, research and development expenses) or financial market data (e.g. beta, market value, interest). The answer is of great importance for valuators and investors as it will help them focus on the most important variables and make better valuations and choices. This answer is also important for accounting standard setters as the preferred method will serve as an indicator for the quality of financial statements and their importance to users. The paper contributes to the existing literature in the fields of value relevance of accounting information and firm valuation and accounting standards (e.g. International Financial Reporting Standards, United States General Accepted Accounting Principles). To answer this question, share prices were estimated based on financial data using the capital asset pricing model and for accounting data, using Ohlson’s model. The results were tested for both methodologies by comparing estimated share prices with actual ones. The greater the correlation between the two variables the better the explanatory power of the model. The focus was on S&P 500 firms for the period 2002–2017.</description><subject>Accounting</subject><subject>Capital assets</subject><subject>Data analysis</subject><subject>Economic Growth</subject><subject>Economics</subject><subject>Economics and Finance</subject><subject>International Economics</subject><subject>International finance</subject><subject>Macroeconomics/Monetary Economics//Financial Economics</subject><subject>Microeconomics</subject><subject>Securities markets</subject><subject>Stock prices</subject><issn>1083-0898</issn><issn>1573-966X</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2020</creationdate><recordtype>article</recordtype><sourceid>ABUWG</sourceid><sourceid>AFKRA</sourceid><sourceid>BENPR</sourceid><sourceid>CCPQU</sourceid><sourceid>DWQXO</sourceid><recordid>eNp9kMtKAzEUhoMoWKsv4CrgOprJZSZxI1VbFSpCK-ouZJJMO22dqUkG9O2NHcGdq3M4_BfOB8Bphs8zjIuLkGVEMoQJRlgWBUNsDwwyXlAk8_xtP-1YUISFFIfgKIQVxpgQmQ_AbFI3ujG13sBH7dcuwlsdNXxxPnQBjoxpuybWzWJ3voSvy9os4bWL0Xk4_txudN0EOI-tWcOZi51vwtUxOKj0JriT3zkE88n4-eYeTZ_uHm5GU2SoYBFxXDqNeaXzgmiGbZkzy8tK5CZ9QIvMcqErWlHDjCmZLUvLiJScOGsNtXQIzvrUrW8_OheiWrWpPhUqQgUnnOVCJBXpVca3IXhXqa2v37X_UhlWP-RUT04lcmpHTrFkor0pJHGzcP4v-h_XNx_ecXc</recordid><startdate>20200201</startdate><enddate>20200201</enddate><creator>Belesis, Nicholas</creator><creator>Sorros, John</creator><creator>Karagiorgos, Alkiviadis</creator><general>Springer US</general><general>Springer Nature B.V</general><scope>AAYXX</scope><scope>CITATION</scope><scope>3V.</scope><scope>7WY</scope><scope>7WZ</scope><scope>7XB</scope><scope>87Z</scope><scope>8AO</scope><scope>8FK</scope><scope>8FL</scope><scope>ABUWG</scope><scope>AFKRA</scope><scope>BENPR</scope><scope>BEZIV</scope><scope>CCPQU</scope><scope>DWQXO</scope><scope>FRNLG</scope><scope>F~G</scope><scope>K60</scope><scope>K6~</scope><scope>L.-</scope><scope>M0C</scope><scope>PQBIZ</scope><scope>PQBZA</scope><scope>PQEST</scope><scope>PQQKQ</scope><scope>PQUKI</scope><scope>Q9U</scope></search><sort><creationdate>20200201</creationdate><title>Financial Market Data Versus Accounting Data: Which Better Explains Stock Returns?</title><author>Belesis, Nicholas ; Sorros, John ; Karagiorgos, Alkiviadis</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c384t-50bea05fa672a40db64d5bf86c097371d58af3f3c4ccb4dbbd429952eddc3d3</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2020</creationdate><topic>Accounting</topic><topic>Capital assets</topic><topic>Data analysis</topic><topic>Economic Growth</topic><topic>Economics</topic><topic>Economics and Finance</topic><topic>International Economics</topic><topic>International finance</topic><topic>Macroeconomics/Monetary Economics//Financial Economics</topic><topic>Microeconomics</topic><topic>Securities markets</topic><topic>Stock prices</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Belesis, Nicholas</creatorcontrib><creatorcontrib>Sorros, John</creatorcontrib><creatorcontrib>Karagiorgos, Alkiviadis</creatorcontrib><collection>CrossRef</collection><collection>ProQuest Central (Corporate)</collection><collection>Access via ABI/INFORM (ProQuest)</collection><collection>ABI/INFORM Global (PDF only)</collection><collection>ProQuest Central (purchase pre-March 2016)</collection><collection>ABI/INFORM Global (Alumni Edition)</collection><collection>ProQuest Pharma Collection</collection><collection>ProQuest Central (Alumni) (purchase pre-March 2016)</collection><collection>ABI/INFORM Collection (Alumni Edition)</collection><collection>ProQuest Central (Alumni Edition)</collection><collection>ProQuest Central UK/Ireland</collection><collection>ProQuest Central</collection><collection>Business Premium Collection</collection><collection>ProQuest One Community College</collection><collection>ProQuest Central Korea</collection><collection>Business Premium Collection (Alumni)</collection><collection>ABI/INFORM Global (Corporate)</collection><collection>ProQuest Business Collection (Alumni Edition)</collection><collection>ProQuest Business Collection</collection><collection>ABI/INFORM Professional Advanced</collection><collection>ABI/INFORM Global</collection><collection>ProQuest One Business</collection><collection>ProQuest One Business (Alumni)</collection><collection>ProQuest One Academic Eastern Edition (DO NOT USE)</collection><collection>ProQuest One Academic</collection><collection>ProQuest One Academic UKI Edition</collection><collection>ProQuest Central Basic</collection><jtitle>International advances in economic research</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Belesis, Nicholas</au><au>Sorros, John</au><au>Karagiorgos, Alkiviadis</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Financial Market Data Versus Accounting Data: Which Better Explains Stock Returns?</atitle><jtitle>International advances in economic research</jtitle><stitle>Int Adv Econ Res</stitle><date>2020-02-01</date><risdate>2020</risdate><volume>26</volume><issue>1</issue><spage>59</spage><epage>72</epage><pages>59-72</pages><issn>1083-0898</issn><eissn>1573-966X</eissn><abstract>This paper presents the comparison of how financial market and accounting data affect stock prices and returns. The goal was to ascertain whether financial information or accounting data dominate in evaluating stock prices. Most valuation techniques used by firms are based on models using either accounting variables (earnings, book value, cash flows, research and development expenses) or financial market data (e.g. beta, market value, interest). The answer is of great importance for valuators and investors as it will help them focus on the most important variables and make better valuations and choices. This answer is also important for accounting standard setters as the preferred method will serve as an indicator for the quality of financial statements and their importance to users. The paper contributes to the existing literature in the fields of value relevance of accounting information and firm valuation and accounting standards (e.g. International Financial Reporting Standards, United States General Accepted Accounting Principles). To answer this question, share prices were estimated based on financial data using the capital asset pricing model and for accounting data, using Ohlson’s model. The results were tested for both methodologies by comparing estimated share prices with actual ones. The greater the correlation between the two variables the better the explanatory power of the model. The focus was on S&P 500 firms for the period 2002–2017.</abstract><cop>New York</cop><pub>Springer US</pub><doi>10.1007/s11294-020-09774-4</doi><tpages>14</tpages></addata></record> |
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subjects | Accounting Capital assets Data analysis Economic Growth Economics Economics and Finance International Economics International finance Macroeconomics/Monetary Economics//Financial Economics Microeconomics Securities markets Stock prices |
title | Financial Market Data Versus Accounting Data: Which Better Explains Stock Returns? |
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