The Higher Moments of Future Earnings

• 成果类型: Article
• 署名作者: Chang, Woo-Jin; Monahan, Steven J.; Ouazad, Amine; Vasvari, Florin P.
• 署名单位: Hautes Etudes Commerciales (HEC) Paris; Utah System of Higher Education; University of Utah; Universite de Montreal; HEC Montreal; University of London; London Business School
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2015-0413
• 发表日期: 2021
• 页码: 91-116
• 关键词: time-series properties; Cash flows; RISK; quantile; models; equilibrium; preference; accruals; prices; cost

摘要

We evaluate whether reported accounting numbers are informative about earnings uncertainty and whether earnings uncertainty is priced. We use quantile regressions to forecast the standard deviation, skewness, and kurtosis of future earnings. These three moments are important measures of earnings uncertainty because they reflect the size of the average deviation from expected earnings and the amount of extreme upside potential, extreme downside risk, or both. We develop a novel approach for evaluating the reliability of our forecasts and we show that they are reliable. We also document that: (1) equity prices are increasing (decreasing) in the standard deviation and skewness (kurtosis) of lead return on equity and (2) credit spreads are increasing (decreasing) in the standard deviation and kurtosis (skewness) of lead return on assets. Our results indicate that historical financial statements are informative about earnings uncertainty and that earnings uncertainty is priced.