Cost of Information and Security Prices: A Comment

This article comments on the article "Cost of Information and Security Prices: Market Association Tests for Accounting Policy Decisions," by Robert G. May and Gary L. Sundem, published in the January 1973 issue of the journal "The Accounting Review." May and Sundem presented an analysis of the information set underlying a set of market-clearing security prices. The authors conclude that choosing between accounting alternatives on the basis of benefits and costs to society is a complicated procedure and that alternative accounting procedures may lead to alternative sets of market-clearing prices, so that the market association of an unreported accounting alternative may not reflect its actual information content. It is found that the conditions under which market association measures are valid are not as restricted as those found by May and Sundem. It was found that the conditions under which market association measures are valid are not as restricted as those found by May and Sundem. In cases where an unreported accounting alternative provides more timely information than the currently reported alternative, market associations are valid if they are measured over an appropriate time period.