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On the importance of clean accounting measures for the tests of stock market efficiency
January 18, 2008 17:39

Tests of the semi-strong form of the efficient market hypothesis (EMH) typically use earnings and book value of equity as benchmarks of fundamental value. Accounting earnings, however, are contaminated by noise due to their transient component and book value of equity tends to be biased downwards due to accounting conservatism. We investigate whether controlling for these effects impacts on the implications concerning the information efficiency of the Swedish stock market.

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Tags: stock, accounting, Swedish, market