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Recently, a growing body of literature has suggested that financial statements have lost their value-relevance because of a shift from a traditional capital intensive economy to a high-technology, service-oriented economy. These conclusions are based on studies that find a temporal decline in the association between stock prices and accounting information (earnings and book values). This paper empirically tests a theoretical prediction arising from the noisy rational expectations equilibrium model that suggests that the decline could be driven by non-information-based (NIB) trading activity, because such trading reduces the ability of stock prices to reflect accounting information. Specifically, Dontoh, Radhakrishnan, and Ronen (2004) show that when NIB trading increases, the R²2 of a regression of stock price on accounting information declines. Our empirical tests confirm this prediction; that is, the decline in the association between stock prices and accounting information as measured by R²s driven by an increase in NIB trading. [ABSTRACT FROM AUTHOR]