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MARYAM
P64537
&
P61277
Introduction
Better known as the market paradigm Attempts to assess the usefulness of accounting information to decision makers by an evaluation of the market behaviour following the release of the information. The market paradigm, focuses on market valuation as a guide to the assessment of the effect of accounting information and its decision usefulness.
(by Ahmed Riahi-Belkaoui, Accounting , A multiparadigmatic science
Gonedes Arguing
Should
govern
To the counterarguments: 1-that the procedures used to produce the numbers may induce market inefficiencies 2-that recipients may be conditioned to respond to accounting numbers in particular manner He argued that if they were true , the opportunity for those who possess this knowledge to earn an abnormal profit would provide a basis for the dissolution of the market paradigm within the context of an efficient capital market .
Relies .
on
ownership shares
They concluded that the price-domain analyses is sufficient for assessing the effects of alternative accounting procedures .
Abnormal return
Is zero
THEORIES
In fact the theories confirming the market behavior paradigm include : The Efficient Market Model. The Efficient Market Hypothesis (EMH) The Capital Asset Pricing Model (CAPM) The Arbitrage Pricing Theory (APT) The Equilibrium Theory of Option Pricing.
Assumption :
costless access to available information capable analysis skills by participants close attention to market prices which adjust appropriately.
current
prices
Strong-Form Hypothesis current prices reflect all public information and non-public information.
METHODS
1. 2. 3. 4. 5. The Market Model The Beta Estimation Model The Event Study Methodology The Ohlsons Valuation Model The Price-level Balance Sheet Evaluation Model 6. The Models of the Relation between Earnings and Return.
It also has been developed into several versions, e.g., Feltham-Ohlson (1995)Valuation Model, Bernards (1995) Ohlson Approximation Model, Liu-Ohlson (2000) Valuation Model and Callens (2001) Ohlson AR(2) Valuation Model.