The Shanghai Stock Market Investment Risk And Financial Information Related To Research

The present study aims to investigate the association between marketdetermined and accounting determined risk measures. it verifies that thefinancial statement information explains financial analysts' riskperception. The evidence supports the contention that accounting measures ofrisk are impounded in the market-price based risk measure. There is ahigh degree of contemporaneous association between the accounting andmarket risk measures. More precisely, a strategy of selecting and rankingportfolios according to the accounting risk measures is essentiallyequivalent to a strategy of ranking those same portfolios according to themarket - determined risk measure. This finding is consistent with the jointhypothesis that accounting data do reflect the underlying events thatdetermine differential risk among securities and that such events are alsoreflected in the market prices of securities. The finding is also consistent with other hypotheses, which arehighlighted by raising the following two issues: (a) Does the evidenceimply that investors actually use accounting risk measures in makingportfolio decisions? (b) To what extent can market, rice based dependentvariables, such as the Beta value, be used as a "standard" against which toevaluate accounting data? There is some evidence of an indirect nature that suggests that suchan interpretation is not a correct one. The empirical research in thebehavior of security prices indicates the securities market is "efficient , "in the sense that information appears to be impounded in security pricesrather quickly and , on the average , in an unbiased manner . However,further research of a more direct sort is needed to resolve the issue. Inparticular, the research must deal with such questions as : (1) is there abias in favor of the reported method showing an association with marketprice variables , because it is more visible than non-reported methods ? (2)Are investors "fooled" by the reported numbers and fail to make properadjustments for measurement errors in the accounting data? (3) Doinvestors fail to compensate for differences in reporting methods acrossfirms and for changes in reporting methods for a given firms over time? Until questions of this sort are answered, the observed associationsare open to both interpretations , and it is difficult to ascertain to whatextent market-price based dependent variables can be used as "standards",against which to evaluate accounting measurements. However, theexistence of such an unresolved issue in no way detracts from theusefulness of the study's findings . In fact ,if one admits the importanceof resolving such issues , the study takes on special significance. In fact,it was our concern about the importance of such issues that motivated usto conduct the study.