Ray Ball and Philip Brown are to be honored with the Wharton-Jacobs Levy Prize for Quantitative Financial Innovation for their work linking stock prices to accounting data.
Mr. Ball, a professor of accounting at the University of Chicago Booth School of Business, and Mr. Brown, a senior honorary research fellow in accounting and finance and professor emeritus at the University of Western Australia, are being recognized for their 1968 paper, "An Empirical Evaluation of Accounting Income Numbers" in the Journal of Accounting Research.
"This work by Ball and Brown was incredibly innovative in that it changed the perception of accounting (data) in the investing world," said Geoffrey Garrett, dean of the Wharton School, University of Pennsylvania, in a Sept. 10 news release announcing the award. "It laid the foundation for much of the research to follow in accounting and finance."
The paper shows the correlation between net income and stock prices.
Messrs. Ball and Brown, both Australian, met in the 1960s when they were doctoral students at the University of Chicago. They published a copy with notes on its research design and historical impact of the paper this year in the Pacific-Basin Finance Journal to commemorate its 50th anniversary.
Bruce I. Jacobs, co-chief investment officer, portfolio manager and co-director of research at Jacobs Levy Equity Management and chairman of the selection committee, said in the news release that the paper opened the door to new empirical research in finance and innovations in investment management.
It "ignited a revolution in accounting and capital markets research," Mr. Jacobs said.
The award will be presented Sept. 27 in New York during the fall conference of the Wharton School's Jacobs Levy Equity Management Center for Quantitative Financial Research.