A Reformulation of the API Approach to Evaluating Accounting Income Numbers

Joseph K. Winsen

Journal of Financial and Quantitative Analysis, 1977, vol. 12, issue 3, 499-504

Abstract: The API metric, as initially formulated by Ball and Brown [1], has been used to examine the relationship between stock prices and accounting numbers. Its use in this manner has raised at least three difficulties: (1) the metric does not utilize all of the information portentially available from accounting numbers, (2) the statistical significance of the API metric and of differences between API's has not always been satisfactorily considered, and (3) the meaning of the metric has been questioned. This paper will attempt to resolve these difficulties by reformulating the API approach. Two nonparametric statistical procedures are considered, both of which provide a test of the statistical significance of the relationship between accounting income numbers and stock prices. The first procedure is particularly appropriate when alternative accounting income numbers are considered. Both procedures provide a conventional unambiguous interpretation of the results.

Date: 1977
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:12:y:1977:i:03:p:499-504_02

Access Statistics for this article

More articles in Journal of Financial and Quantitative Analysis from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().