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The Relevance of Value

John Goodwin

Sabanci University

Kim R. Sawyer

University of Melbourne - School of Historical and Philosophical Studies

Kamran Ahmed

La Trobe University


We propose a theory of value relevance based on a theory of information, with foundations in the efficient markets hypothesis. Like the EMH, we consider a theory of heterogeneous information, and like the EMH, testing for value relevance becomes a joint test of market efficiency, the process of price determination and value relevance. In assuming heterogeneity of information, we permit a classification of value relevance studies into weak-form, semi-strong and strong-form value relevance, similar to the classification used by Fama (1970) in defining the EMH.

As a consequence, we introduce an Efficient Accounting Hypothesis, and classify existing value relevance studies according to this hypothesis. The theory which we propose implies a recursive procedure for estimation, and we discuss the econometric implications.

Number of Pages in PDF File: 31

Keywords: Value relevance, Market efficiency, Efficient accounting hypothesis

JEL Classification: G14, M41

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Date posted: February 12, 2002  

Suggested Citation

Goodwin, John and Sawyer, Kim R. and Ahmed, Kamran, The Relevance of Value (Undated). Available at SSRN: https://ssrn.com/abstract=299466 or http://dx.doi.org/10.2139/ssrn.299466

Contact Information

John Goodwin (Contact Author)
Sabanci University ( email )
Orta Mahalle Üniversite Caddesi 27
Istanbul, Orhanli, 34956 Tuzla 34956
90 0216 4839675 (Phone)
Kim Russell Sawyer
University of Melbourne - School of Historical and Philosophical Studies ( email )
Kamran Ahmed
La Trobe University ( email )
Victoria, 3086
61394791125 (Phone)
61394792356 (Fax)
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