INFORMATION IN PRICES ABOUT FUTURE EARNINGS - IMPLICATIONS FOR EARNINGS RESPONSE COEFFICIENTS

• 成果类型: Article
• 署名作者: KOTHARI, SP; SLOAN, RG
• 署名单位: University of Pennsylvania
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/0165-4101(92)90016-U
• 发表日期: 1992
• 关键词: accounting earnings; SECURITY RETURNS; stock returns; market value; association; decisions; firm; size

摘要

Stock return over a period reflects the market's revision in expectation of future earnings. Accounting earnings over the same period, however, have limited ability to reflect such revised expectations. Therefore, returns anticipate earnings changes and the earnings response coefficient from a regression of returns on contemporaneous earnings changes is biased toward zero. We reduce this bias by including leading-period returns in price-earnings regressions. The resulting estimated earnings response coefficient magnitudes suggest that the capital market, on average, views earnings changes to be largely permanent. This is consistent with the random walk time series property of annual earnings.