Security Returns and the Value Relevance of Accounting Data

INTRODUCTION Empirical market-based accounting research seeks evidence of the value relevance of accounting data via analysis of the relation between these data and various market variables. The decade of the 1990s witnessed an increasing use of price per share and market rate of return as the market variables of interest. The focus of this commentary is on regressions of price per share on the levels of various financial statement data (referred to herein as “price-levels regressions”) and regressions of returns on changes in these financial statement variables (referred to herein as “returns regressions”). The main points in the commentary are: