Combining (i) a consumption-based asset pricing model without market return derived by Restoy and Weil (2004) and (ii) a log-linearized clean-surplus relation by Vuolteenaho (2000), I have developed a consumption and accounting-based asset pricing model. Accounting numbers are crucial...

The dividend discount model is a special case of the residual income model and the fundamental value of the firm is a scalar invariant under any accounting system with the clean-surplus. Under double-entry bookkeeping, any accounting system is relative concerning valuation in the sense that the...

To make accounting information useful for investment decision, the FASB/IASB Conceptual Framework Project must carefully study such economic concepts as income, and take an established piece of empirical evidence seriously: cost of capital is not stable, let alone constant

This article decomposes the business-level profit rate of Japanese multi-business corporations by performing a variance components analysis on a large sample of publicly traded non-financial firms in 1998-2003. Consistent with US evidence, estimation results demonstrate that profitability is...