Core earnings: New data and evidence

• 成果类型: Article
• 署名作者: Rouen, Ethan; So, Eric C.; Wang, Charles C. Y.
• 署名单位: Harvard University; Massachusetts Institute of Technology (MIT)
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.04.025
• 发表日期: 2021
• 页码: 1068-1091
• 关键词: Core earnings; Transitory earnings; Non-operating earnings; Quantitative disclosures; Information processing; Fundamental analysis; valuation

摘要

Using a novel dataset, we show that components of firms' GAAP earnings stemming from ancillary business activities or transitory shocks are significant in frequency and magnitude. These components have grown over time and are dispersed across various sections of the 10-K. Excluding them from GAAP earnings yields a core earnings measure that distinguishes between the recurring and non-recurring components of net income and forecasts future performance. Analysts and market participants are slow to impound these earnings components' implications, particularly the amounts disclosed in the footnotes. Trading strategies that exploit non-core earnings produce abnormal returns of 8% per year. (c) 2021 Elsevier B.V. All rights reserved.