The Information Content of Accounting Earnings in Greece

This paper investigates the information content of earnings with respect to equity prices of Greek firms using the VAR model to mimic the expectations mechanism of earnings growlh rates and stock price retums. The results indicate that earnings growth rates are predictable using past earnings growth rates. Stock price returns, on the other hand, are predictable using past earnings growth rates as well as past stock price returns. Regressions run using the unexpected components of stock price returns and earnings growth rates indicate lhat accouhting earnings possess a statistically significant but weak information content. Firm size has no incremental explanatory power with respect to equity prices.