Journal of Accounting Research Vol. 46 No. 4 2008
Keynesian Beauty Contest, Accounting Disclosure, and Market Efficiency
Abstract
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.
- DOI
- 10.1111/j.1475-679x.2008.00295.x
- Volume
- 46
- Issue
- 4
- Pages
- 785-807
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref