In an article published in the Journal of Accountancy, James Deitrick and Walter Harrison noted that the major markets fro common stocks (e g , the New York Stock Exchange, the American Stock Exchange) have been found to be efficient That is, common stock prices behave as if they fully incorporate ...

a An efficient market implies that all information about a company is reflected in the pri ...

In an article published in the Journal of Accountancy, James Deitrick and Walter Harrison noted that the

Question:

In an article published in the Journal of Accountancy, James Deitrick and Walter Harrison noted that the major markets fro common (e.g., the New York Stock Exchange, the American Stock Exchange) have been found to be efficient. That is, “common stock prices behave as if they fully incorporate all existing information quickly and without bias. This implies that information, old and new, has been impounded into security prices as a result of the analysis and collective wisdom of investors and their advisors”. This finding has encouraged many accountants to contend that the information contained in financial reports cannot be used to identify under valued common in an efficient market.
REQUIRED:
a. Provide the rationale for why the information contained in financial reports cannot be used to identify undervalued securities.
b. Explain how financial accounting information can be useful even though it may not be helpful in identifying undervalued securities that are traded in efficient markets.

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...