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Jurnal Ekonomi & Bisnis Indonesia


Earnings yield, book value, profitability, growth opportunities, discount rate, accounting fundamentals, recursive simultaneous model


  1. Sumiyana
  2. Zaki Baridwan




      This study investigates
      association between accounting fundamentals and variations of stock prices
      using recursive simultaneous equation model. The accounting fundamentals
      consist of earning yield, book value, profitability, growth opportunities and
      discount rate. The prior singlr relationship model has been investigated by
      Chen and Zhang (2007), Sumiyana (2011) and Sumiyana et al. (2010). They assume
      that all accounting fundamentals associate direct-linearly to the stock
      returns. This study assembles that all accounting fundamentals should associate
      recursively. This study reconstructs the model and found that only the first
      two factors could influence stock returns directly, while the three re-maining
      factors should relate precedently to the earnings yield and book value. This
      study suggests that new reconstructed relationship among accounting
      fundamentals could decompose association degree between them and the movements
      of stock prices. Finally, this study concludes that this methodological
      refinement would improve the ability of predicting stock prices and reduce
      stock price deviations. It implies that accounting fundamentals actually have
      higher value relevance in the new recursive simultaneous equation model than
      that in single equation model. It also entails that relationship decompositions
      revitalize the integration of the adaptation and the recursion theories.



      Vol 28, Nomor 01, Tahun 2013


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