| Abstract | In this paper, we investigate in the A share market after the new accounting principles have been executed since 2007 whether the fair value accounting increate the market volatility and lead to the financial crisis. Our findings are: 1) the stock prices do react to the fair value information, the fair value information are more explanatory for stock prices in up market than in down market, and more in unstable period than in stable period; 2) the fair value information are explanatory to the changes of the stock prices, which reflect the existence of the “the asset price circle”, and it’s more explanatory in up market than in down market, also more in unstable period than in stable period; 3) the fair value amounts are positively correlated with the market volatility, and this correlation is observed only in the unstable period. This finding reveals that the fair value information would enhance the volatility of the market in the unstable period. In the weak market, mark-to-market accounting increases the going-down risk, but it’s not the key cause for the financial crisis. In addition, two new issues would be much concerned. One is how to measure the fair value at illiquidity situations, the other is how to reflect the fair value in equity price properly. |