This paper examines the market efficiency consequences of accounting disclosure in the context of stock markets as a Keynesian beauty contest, an influential metaphor originally proposed by Keynes (1936) and recently formalized by Allen, Morris, and Shin (2006). In such markets, public information plays an additional commonality role, biasing stock prices away from the consensus fundamental value toward public information. Despite this bias, I demonstrate that provisions of public information always drive stock prices closer to the fundamental value. Hence, as a main source of public information, accounting disclosure enhances market efficiency, and transparency should not be compromised on grounds of the Keynesian-beauty-contest effect.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
9480.
Find related papers by JEL classification: K2 - Law and Economics - - Regulation and Business Law M4 - Business Administration and Business Economics; Marketing; Accounting - - Accounting E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
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