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Strategies & Market Trends : Mu Gamma Lambda

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To: Stoctrash who wrote (2315)7/18/2001 5:02:24 PM
From: MulhollandDrive  Read Replies (1) of 10077
 
Accounting (earnings) scams? What are those?

(more good stuff from the Market Lab)

econserv2.bess.tcd.ie

It has been argued that the use of dividends in this calculation does not accurately reflect the simple efficient market model. These theorists claim that the price should be the discounted present value of expected future earnings. Shiller claims that earnings are only relevant to the share price insofar as earnings are indicators of future dividends. He says that earnings are, in reality, only an accounting concept and, as has been proved, can thus be easily manipulated to reflect whatever the accountant wants to show about a particular stock. Earnings bear no relationship to revenue which is what the average investor is concerned with.
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