Accounting for Risk

This monograph reports on developing research that assesses the risk of equity investing from financial statements. The relevant information is conveyed by accounting numbers generated under accounting principles that respond to risk and its resolution, namely the realization principle and conservative accounting for investment. The recognition of this information leads to a financial statement analysis that extracts the risk information, to a reevaluation of performance metrics, and to revisions in risk factor models in asset pricing that utilize accounting information. The research also has implications for accounting-based valuation and for accounting standards that provide information for valuation and equity investing.