1. California State University Fullerton Earnings-Returns Association in an Emerging Market: An Empirical Analysis of Abu Dhabi Securities Market Fatima A. Alali & Paul Sheldon Foote California State University Fullerton Southeast AAA Conference April 3-5, 2008

2. California State University Fullerton Background - ADSM ADSM was established on 15 November 2000 61 firms are traded on the market including two debt securities 9 different industry segments Firms classified into market caps, by segment and there is an overall ADSM index The market has witnessed increased trading volume and returns until 2005, the market has declined significantly since early 2006

3. California State University Fullerton Objective The objective of the study is to examine earnings-returns association in the ADSM over a period 2000-2006 Prior studies tested for earnings- returns association in U.S., U.K. and emerging markets (e.g. China, South America), as a test of value relevance of accounting information

4. California State University Fullerton Findings There is an overall significant positive association between earnings level and returns in ADSM This positive significant relationship is more obvious in 2000, 2001, 2003 and 2006 There is negative association between earnings and returns in 2002 and 2005, and in energy and insurance segments There is insignificant association between earnings level and returns in years 200 and 2004 and in banking and industrial segments The association between earnings change and returns also varies between years and across industry segments. The adjusted R-squares in models estimated range between 0.01% - 18.61%

5. California State University Fullerton Prior Studies Studies examined the earnings-returns association in U.S. over varying period of time e.g. Ball and Brown, 1968; Easton and Harris, 1991 Studies examined the earnings-price association in U.S. and other markets e.g. Landsman, 1986; Ohlson, 1995; Barth et. al, 1998; Burgstahler and Dichev, 1997 In emerging market settings, most recent study by Liu and Liu (2007) uses modified Ohlson (1995) in the Chinese stock exchanges Other studies in the south American, Italian, securities markets

6. California State University Fullerton Sample & Methodology We hand-collect data on 58 firms in 9 industry segments, a total useable with nonmissing earnings and returns data, (N= 30,016 firm-daily) All firms in the sample have Dec 31 st fiscal year-end and use IFRS, translation of data is done using Dec 31 st exchange rates (as necessary) We use Easton and Harris (1991) models to estimate earnings-returns association Returns it =  0 +  1 Earns it +  Returns it =  0 +  1 Earns it +  2 ΔEarns it +  We estimate the models, for the pooled sample, by year and by industry Data distribution presented in Table 1

7. California State University Fullerton Descriptive Statistics–Table 2 Panel A

8. California State University Fullerton Table 2 Panel A - Cont.

9. California State University Fullerton Table 2 Panel A - Cont.

10. California State University Fullerton Correlation Matrix – Table 2 Panel B

11. California State University Fullerton OLS Regression Analysis using Total Sample and by Year- Table 3

12. California State University Fullerton OLS Regression Analysis by Industry – Table 4

13. California State University Fullerton Conclusions Earnings-returns association in the ADSM varies by year and by industry Some evidence on value relevant of earnings Additional analysis is underway to examine other model specifications and data from Dubai Financial Market