The structural relationship between financial ratios and capital asset pricing

The relationship between financial statement information and security market information has been the subject of intensive theoretical and empirical research. The bulk of empirical studies consider this relationship without an explicit consideration of causality. In the present study we put forward some novel results concerning the direction of causality between these two information sets. Our results indicate that the accrual information in financial statements has some projective value with respect to future reactions on the security markets.