LIFO-FIFO, ACCOUNTING RATIOS AND MARKET RISK: A RE-ASSESSMENT |
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| Authors: | Pieter T Elgers Dennis Murray |
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| Institution: | The authors are respectively, Professor of Accounting at the University of Massachusetts, Amherst;and Assistant Professor at the University of Colorado, Denver. |
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| Abstract: | This paper re-examines the effect of the inventory costing method on the association between accounting risk measures (ARMs) and market risk, and extends earlier research in several respects. The groups of FIFO and LIFO firms are matched on the basis of various financial characteristics to reduce selfselection bias, and the effect of inventory costing methods on the usefulness of ARMs in predicting market risk is investigated. The findings indicate that predictions based on FIFO show an improvement on market based predictions, but predictions based on LIFO fail to show such an improvement. |
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