Evidence on Income Measurement Properties of ASR No. 190 and SFAS No. 33 Data

Abstract

A number of studies have tested the association between security returns or levels of market value and current cost accounting data as reported under SEC Accounting Series Release No. 190 (ASR 190) and Statement of Financial Accounting Standards No. 33 (SFAS 33). For example, Beaver, Griffin, and Landsman [1982] (henceforth BGL), Beaver and Landsman [1983] (henceforth BL), and Olsen [1985] found no association, while Bublitz, Frecka, and McKeown [1985] (henceforth BFM) and Murdoch [1986] found a weak association.1 In this paper we estimate cross-section regressions of security returns on historical cost net income and holding gains, as was done previously, but with several extensions. First, we define our variables in terms of realizations of returns, income, and holding gains rather than in terms of unexpected changes. Thus, we