Accounting and Efficient Markets

  • Michael Firth
Part of the Studies in Finance and Accounting book series (SFA)


The efficient-markets theory says that share prices always fully reflect publicly available information and that any new items of information are instantaneously reflected in those prices. Thus any ‘new’ information of ‘economic’ value contained in annual or interim accounts should cause an immediate reaction in share prices as they adjust to reflect this information. ‘New’ information and ‘economic’ value are stressed as many data contained in accounting reports have already been reflected in share prices (i.e. anticipated by investors) and some data have no impact or no obvious impact on the economic value of the firm (for example directors’ shareholdings). If one assumes that the market is efficient or ‘reasonably’ efficient, then this has certain implications for accounting.


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Notes and References

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Copyright information

© Michael Firth 1977

Authors and Affiliations

  • Michael Firth
    • 1
  1. 1.Department of Accountancy and Business LawUniversity of StirlingUK

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