The Role of Value Relevance of Earnings according to the Predicative Ability in Forecasting Market Stock Prices and Returns: An Empirical Study

Abstract

Purpose: In this research , I want beyond conducting the current research is to verify the relationship among the earnings and stock market prices and returns by using the predicative ability of the research sample represented by Al-Mansour Investment Bank during the period (2011-2021).

Theoretical framework: It deals with the theoretical framework of the research deals with the concept of Concept of Earnings, The Concept of Value Relevance of Earnings, The importance of value relevance of earnings and Forecasting Stock Prices and Return .

Method: The research relied on the inductive approach for the theoretical side, and the statistical approach was followed by using modern statistical programs, Verifying the relationship  was made through applying two models of accounting measurement, namely (the price model and the return model) because of their instrumental role in forecasting the prices and returns of market stocks that lead to rationalizing the investment decisions among the investing stakeholders as well as shareholders in the Iraqi Stock Exchange by using the (SPSS) program

Result and conclusion: One of the most important findings of the research is the high predicative ability when measuring earnings in forecasting market stock prices and returns, due to the high coefficient of determination (R2) in both models. The research results for Ohlson's scale showed that there was a direct and significant effect of earnings and stock market prices, as an increase in earnings by one unit would lead to an increase in stock market prices by (0.914). The research results for the (Easton & Harris) scale showed that there was a direct and significant effect of earnings and stock market returns, as an increase in earnings by one unit would lead to an increase in stock market returns by (4.434). These results were positive indicators in forecasting the stock market prices and returns.