10. Market-Based Accounting Research (MBAR) Models: A Test of ARIMAX Modeling

The purpose of this study is to provide evidence drawn from publicly traded companies in Greece as far as some of the standard models of accounting earnings and returns relations mainly collected through the literature. Standard models such as earnings level and earnings changes have been investigated in this study. Models that fit better to the data drawn from companies listed on the Athens Stock Exchange have been selected employing autoregressive integrated moving average with exogenous variables (ARIMAX) models. Models I (price on earnings model), II (returns on change in earnings divided by beginning-of-period price and prior period), V (returns on change in earnings over opening market value),VII (returns deflated by lag of 2 years on earnings over opening market value), and IX (differenced-price model) have statistically significant coefficients of explanatory variables. In addition, model II (returns on change in earnings divided by beginning-of-period price and prior period with MSE (minimum squared error) loss function in ARIMAX (2,0,2)) is prevalent. These models take place with backward-looking information instead of forward-looking information that recent literature is assessed. Application of generalized autoregressive conditional heteroscedasticity (GARCH) models is suggested for further future research.