Abstract

This study examines the declining association between earnings, cash flows and returns due to market noise in companies listed in Tehran stock exchange. The receiver samples is the 104 companies listed in Tehran Stock Exchange during the 10-year period (2001-2010). Assumptions of linear regression model with stationary significant level %5 have been tested.
The results show that the correlation between current-year returns and current-year earnings R 2(Rt , Et) is positively associated with correlation between current-year returns and future earnings R 2(Rt, Et‏+1) when noise in stock returns is the primary source of temporal reduction in the value relevance of earnings. And correlation between current-year returns and current-year earnings R 2(Rt , Et) is not positively associated with correlation between last- year returns and current-year earnings R 2(Rt-1, Et) when noise in earnings is the primary source of temporal reduction in the value relevance of earnings. Also correlation between current-year returns and current-year cash flow R 2(Rt, Ct) is positively associated with correlation between current-year returns and future cash flow R 2(Rt, Ct‏+1) when noise in stock returns is the primary source of temporal reduction in the value relevance of cash flows. And correlation between current-year returns and current-year cash flow R 2(Rt, Ct) is positively associated with correlation between last- year returns and current-year cash flows R 2(Rt-1, Ct) when noise in cash flows is the primary source of temporal reduction in the value relevance of cash flows.