How do accounting variables explain stock price movements? Theory and evidence

• 成果类型: Article
• 署名作者: Chen, Peter; Zhang, Guochang
• 署名单位: Hong Kong University of Science & Technology
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2007.01.001
• 发表日期: 2007
• 关键词: earnings research; cross-section; 2 decades; INVESTMENT; DIRECTIONS; valuation; LESSONS; GROWTH

摘要

This paper provides theory and evidence showing how accounting variables explain cross-sectional stock returns. Based on Zhang, G. [2000. Accounting information, capital investment decisions, and equity valuation: theory and empirical implications. Journal of Accounting Research 38, 271-295], who relates equity value to accounting measures of underlying operations, we derive returns as a function of earnings yield, equity capital investment, and changes in profitability, growth opportunities, and discount rates. Empirical results confirm the predicted roles of all identified factors. The model explains about 20% of the cross-sectional return variation, with cash-flow-related factors (as opposed to changes in discount rates) accounting for most of the explanatory power. The properties of the model are robust across various subsamples and periods. (c) 2007 Elsevier B.V. All rights reserved.