The Trend in Firm Profitability and the Cross-Section of Stock Returns

• 成果类型: Article
• 署名作者: Akbas, Ferhat; Jiang, Chao; Koch, Paul D.
• 署名单位: University of Illinois System; University of Illinois Chicago; University of Illinois Chicago Hospital; University of South Carolina System; University of South Carolina Columbia; University of Kansas
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-51708
• 发表日期: 2017
• 页码: 1-32
• 关键词: Investor sentiment; FULLY REFLECT; earnings; MARKET; INFORMATION; performance; momentum; determinants; equilibrium; anomalies

摘要

This study shows that the recent trajectory of a firm's profits predicts future profitability and stock returns. The predictive information contained in the trend of profitability is not subsumed by the level of profitability, earnings momentum, or other well-known determinants of stock returns. The profit trend also predicts the earnings surprise one quarter later, and analyst forecast errors over the following 12 months, suggesting that sophisticated investors underreact to the information in the profit trend. On the other hand, we find no evidence of investor overreaction, and our results cannot be explained by well-known risk factors.