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Author: Jay Junghun Lee
Publisher:
ISBN:
Category :
Languages : en
Pages : 32
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Book Description
Prior literature suggests that stock prices lead earnings in reflecting value-relevant information because accounting income incorporates information discretely to satisfy recognition principles while stock prices incorporate it continuously. Using the future earnings response coefficient (FERC) methodology, this study derives a model that relates the recognition lag of earnings to the incremental informativeness of future anticipated earnings in equity prices after controlling for current realized earnings. The analytical FERC model shows that the pricing coefficient on future earnings is positive in the presence of stock prices leading earnings. More importantly, the pricing coefficient on future earnings increases with the recognition lag but the pricing coefficient on current earnings decreases with the lag. The results suggest that recognition principles that intend to enhance the reliability of earnings inadvertently lower the timeliness of earnings and thus shift the investors' demand for value-relevant information from current realized earnings to future anticipated earnings. In addition, this study confirms the FERC model as an empirical model that investigates the extent to which stock prices lead earnings.
Author: Jay Junghun Lee
Publisher:
ISBN:
Category :
Languages : en
Pages : 32
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Book Description
Prior literature suggests that stock prices lead earnings in reflecting value-relevant information because accounting income incorporates information discretely to satisfy recognition principles while stock prices incorporate it continuously. Using the future earnings response coefficient (FERC) methodology, this study derives a model that relates the recognition lag of earnings to the incremental informativeness of future anticipated earnings in equity prices after controlling for current realized earnings. The analytical FERC model shows that the pricing coefficient on future earnings is positive in the presence of stock prices leading earnings. More importantly, the pricing coefficient on future earnings increases with the recognition lag but the pricing coefficient on current earnings decreases with the lag. The results suggest that recognition principles that intend to enhance the reliability of earnings inadvertently lower the timeliness of earnings and thus shift the investors' demand for value-relevant information from current realized earnings to future anticipated earnings. In addition, this study confirms the FERC model as an empirical model that investigates the extent to which stock prices lead earnings.
Author: H. M. Gartley
Publisher: Health Research Books
ISBN: 9780939093076
Category : Business & Economics
Languages : en
Pages : 486
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Book Description
Author: Peter Douglas Easton
Publisher:
ISBN: 9780646086972
Category : Stocks
Languages : en
Pages : 31
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Book Description
Author: Richard M. Morton
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This study extends previous research that documents a stock price reaction leading accounting earnings. The primary issue is that prior studies use a naive earnings expectations model (random walk) as the benchmark for the information content of lagged returns and do not adequately address the incremental information content of lagged returns. This study identifies and estimates firm-specific models of earnings to directly control for the autocorrelation in earnings. The explanatory power of lagged prices with respect to this earnings residual is investigated using both a multiple regression model of lagged returns and also a multiple time-series vector autoregressive model.In-sample estimation of the models provides clear evidence that stock prices impound information about future earnings incremental to the information contained in historical earnings data. Holdout-period analysis of the earnings forecasts from these lagged-return models finds that both models outperform the naive seasonal random walk expectation, but neither model outperforms the more sophisticated Box-Jenkins forecasts. On an individual firm basis, earnings forecasts supplemented with the lagged-return data tend to be less precise than the Box-Jenkins forecasts, but the price-based models demonstrate an ability to rank order the earnings forecast error from the time-series model. The analysis helps to characterize the limitations of lagged returns as a means of predicting future earnings innovations.
Author: William T Ziemba
Publisher: World Scientific
ISBN: 9813223863
Category : Business & Economics
Languages : en
Pages : 309
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Book Description
'Overall, the book provides an interesting and useful synthesis of the authors’ research on the predictions of stock market crashes. The book can be recommended to anyone interested in the Bond Stock Earnings Yield Differential model, and similar methods to predict crashes.'Quantitative FinanceThis book presents studies of stock market crashes big and small that occur from bubbles bursting or other reasons. By a bubble we mean that prices are rising just because they are rising and that prices exceed fundamental values. A bubble can be a large rise in prices followed by a steep fall. The focus is on determining if a bubble actually exists, on models to predict stock market declines in bubble-like markets and exit strategies from these bubble-like markets. We list historical great bubbles of various markets over hundreds of years.We present four models that have been successful in predicting large stock market declines of ten percent plus that average about minus twenty-five percent. The bond stock earnings yield difference model was based on the 1987 US crash where the S&P 500 futures fell 29% in one day. The model is based on earnings yields relative to interest rates. When interest rates become too high relative to earnings, there almost always is a decline in four to twelve months. The initial out of sample test was on the Japanese stock market from 1948-88. There all twelve danger signals produced correct decline signals. But there were eight other ten percent plus declines that occurred for other reasons. Then the model called the 1990 Japan huge -56% decline. We show various later applications of the model to US stock declines such as in 2000 and 2007 and to the Chinese stock market. We also compare the model with high price earnings decline predictions over a sixty year period in the US. We show that over twenty year periods that have high returns they all start with low price earnings ratios and end with high ratios. High price earnings models have predictive value and the BSEYD models predict even better. Other large decline prediction models are call option prices exceeding put prices, Warren Buffett's value of the stock market to the value of the economy adjusted using BSEYD ideas and the value of Sotheby's stock. Investors expect more declines than actually occur. We present research on the positive effects of FOMC meetings and small cap dominance with Democratic Presidents. Marty Zweig was a wall street legend while he was alive. We discuss his methods for stock market predictability using momentum and FED actions. These helped him become the leading analyst and we show that his ideas still give useful predictions in 2016-2017. We study small declines in the five to fifteen percent range that are either not expected or are expected but when is not clear. For these we present methods to deal with these situations.The last four January-February 2016, Brexit, Trump and French elections are analzyed using simple volatility-S&P 500 graphs. Another very important issue is can you exit bubble-like markets at favorable prices. We use a stopping rule model that gives very good exit results. This is applied successfully to Apple computer stock in 2012, the Nasdaq 100 in 2000, the Japanese stock and golf course membership prices, the US stock market in 1929 and 1987 and other markets. We also show how to incorporate predictive models into stochastic investment models.
Author: Brian R. Bruce
Publisher: Irwin Professional Publishing
ISBN:
Category : Business & Economics
Languages : en
Pages : 398
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Book Description
Author: Mr.Lamin Leigh
Publisher: International Monetary Fund
ISBN: 1451843224
Category : Business & Economics
Languages : en
Pages : 42
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Book Description
This paper examines the efficiency of the Stock Exchange of Singapore and the relationship between the stock market and the overall economy. Using a wide range of methods for testing market efficiency, the paper establishes that the Singapore stock market is both “weakly” and “semi-strongly” efficient in asset-pricing terms but not “strongly” efficient. Granger causality tests based on the efficiency test results indicate that developments in the stock market appear to be systematically related to the overall economy in Singapore and can thus serve as a leading indicator of its intertemporal behavior.
Author: Burton G. Malkiel
Publisher: W. W. Norton & Company
ISBN: 0393330338
Category : Business & Economics
Languages : en
Pages : 454
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Book Description
Updated with a new chapter that draws on behavioral finance, the field that studies the psychology of investment decisions, the bestselling guide to investing evaluates the full range of financial opportunities.
Author: Michael A. Alexander
Publisher: iUniverse
ISBN: 1462051219
Category : Business & Economics
Languages : en
Pages : 216
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Book Description
"Important reading for serious investors."-InvestorsInsight.com For most Americans, a 401k plan is their first exposure to investing. Many of us are relying on the stock market to provide for us in our retirement yet at the same time, most of us are afraid of the stock market. It's a valid concern. How can something so important to our financial future be so completely unpredictable? When Michael Alexander first started investing in the stock market, he noticed that few analysts seemed to have much knowledge of what the market has done in the past. While no one can give precise answers to questions about the future of the market and be right all the time, Alexander feels that it's possible to gain an understanding of the future of the stock market by studying its past. Analyzing years of historical data for patterns of behavior that might repeat in the future, Alexander provides strong statistical evidence for a cyclical pattern in the stock market. These Stock Cycles show that long periods of poor stock returns have always followed long periods of good returns. Are we in for good times or is the party over?
Author: Patricia Dechow
Publisher:
ISBN:
Category :
Languages : en
Pages : 41
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Book Description
Accounting earnings summarize periodic corporate financial performance and are key determinants of stock prices. We review research on the usefulness of accounting earnings, including research on the link between accounting earnings and firm value and research on the usefulness of accounting earnings relative to other accounting and nonaccounting information. We also review research on the features of accounting earnings that make them useful to investors, including the accrual accounting process, fair value accounting, and the conservatism convention. We finish by summarizing research that identifies situations in which investors appear to misinterpret earnings and other accounting information, leading to security mispricing.
