Gholamreza Karami, Mohammad Moradi, Ali Mahmoudi,
year 16, Issue 61 (8-2024)
Abstract
This study examines the comparative power of market information and accounting information in explaining stock returns, a critical topic in accounting and finance. Using data from companies listed on the Tehran Stock Exchange from 2007 to 2021, the research evaluates the effectiveness of two valuation models: the CAPM (Capital Asset Pricing Model) based on market information and an accounting-based model using earnings per share and book value per share. Employing statistical tests like Spearman correlation and the Wilcoxon test, the findings reveal that the CAPM model consistently demonstrates a stronger correlation with actual stock returns and lower absolute errors compared to the accounting model. Despite the significance of financial statements, the results suggest that market information provides more accurate and meaningful insights for short-term stock return predictions, highlighting limitations in the usefulness of financial statements for investment decisions. The study underscores the potential need for refining accounting standards and encourages future research to explore additional models and diverse markets for broader validation.
