Market Efficiency and Accounting Research: A Discussion of 'Capital Market Research in Accounting' by S.P. Kothari

Posted: 26 Nov 2001

See all articles by Charles M.C. Lee

Charles M.C. Lee

Stanford University - Graduate School of Business

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Abstract

Much of capital market research in accounting over the past 20 years has assumed that the price adjustment process to information is instantaneous and/or trivial. This basic assumption has had an enormous influence on the way we select research topics, design empirical tests, and interpret research findings. In this discussion, I argue that price discovery is a complex process, deserving of more attention. I highlight significant problems associated with a naive view of market efficiency, and advocate a more general model involving noise traders. Finally, I discuss the implications of recent evidence against market efficiency for future capital market research in accounting.

JEL Classification: M41, G12, G14

Suggested Citation

Lee, Charles M.C., Market Efficiency and Accounting Research: A Discussion of 'Capital Market Research in Accounting' by S.P. Kothari. Journal of Accounting & Economics, Vol. 31, Nos. 1-3, September 2001. Available at SSRN: https://ssrn.com/abstract=288265

Charles M.C. Lee (Contact Author)

Stanford University - Graduate School of Business ( email )

Stanford Graduate School of Business
655 Knight Way
Stanford, CA 94305-5015
United States
650-721-1295 (Phone)

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