Cover of: The theory of rational expectations and its applications in accounting by Norton M. Bedford

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The theory of rational expectations and its applications in accounting

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The Theory of Rational Expectation assumes all information relevant to an economic decision is compounded into the market. The information set is assumed to be comprehensive, extending well beyond traditional accounting information. Holding that price is set by the interaction of all public information available in any point in time, the Rational Expectation Hypothesis questions traditional accounting time series analyses that predict future prices by extrapolating from past accounting data. The implications of the Rational Expectation Hypothesis (REH) to accounting are as follows: (1) An expanded income statement should be provided. (2) Accounting information systems should cover larger data base systems. (3) The cost and value of alternative accounting information should be provided. (4) The general price level adjustment should be made. (5) Accounting information should assume that governmental policies cannot control the economy as precisely as desired. (6) Detailed information on risk alternatives should be disclosed. (7) Research is needed to determine the circumstances under which a larger information set will be relevant for forming rational expectations.

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Cover of: The theory of rational expectations and its applications in accounting
The theory of rational expectations and its applications in accounting
1978, College of Commerce and Business Administration, University of Illinois at Urbana-Champaign
in English

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The theory of rational expectations and its applications in accounting

This edition was published in by College of Commerce and Business Administration, University of Illinois at Urbana-Champaign in [Urbana, Ill.].


Edition Description

The Theory of Rational Expectation assumes all information relevant to an economic decision is compounded into the market. The information set is assumed to be comprehensive, extending well beyond traditional accounting information. Holding that price is set by the interaction of all public information available in any point in time, the Rational Expectation Hypothesis questions traditional accounting time series analyses that predict future prices by extrapolating from past accounting data. The implications of the Rational Expectation Hypothesis (REH) to accounting are as follows: (1) An expanded income statement should be provided. (2) Accounting information systems should cover larger data base systems. (3) The cost and value of alternative accounting information should be provided. (4) The general price level adjustment should be made. (5) Accounting information should assume that governmental policies cannot control the economy as precisely as desired. (6) Detailed information on risk alternatives should be disclosed. (7) Research is needed to determine the circumstances under which a larger information set will be relevant for forming rational expectations.

Edition Notes

Includes bibliographical references (leaves 37-38)

Series
Faculty working papers -- no. 482, Faculty working papers -- no. 482.

ID Numbers

Open Library
OL24613167M
Internet Archive
theoryofrational482bedf
OCLC/WorldCat
5109094

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