The study makes two additional contributions. First, we compute incremental explanatory
power for residual earnings (the appropriate value under the residual earnings
model) rather than for earnings as in prior studies. Residual earnings have little correlation
with book value and allow a better separation of the explanatory power of book value and
earnings. Second, we investigate the effects of different price dates in the relation. We find
that year-end stock prices are more highly correlated with accounting variables in most
countries and are near to the highest correlation in all countries.