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Author: S. P. Kothari
Publisher:
ISBN:
Category : Income accounting
Languages : en
Pages : 48
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Book Description
Author: S. P. Kothari
Publisher:
ISBN:
Category : Income accounting
Languages : en
Pages : 48
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Book Description
Author: Raymond Donnelly
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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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: Peter Douglas Easton
Publisher:
ISBN: 9780646086972
Category : Stocks
Languages : en
Pages : 31
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Book Description
Author: Amanda M.. Badger
Publisher:
ISBN:
Category : Business enterprises
Languages : en
Pages : 93
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Book Description
"Bai et al. (2016) show that since the 1960s the ability of prices to explain variation in future earnings (i.e., price informativeness) has significantly increased for S&P 500 firms, but significantly decreased for the full sample of firms. Over the same time period, the fundamental properties of earnings have substantially deteriorated. All else equal, the deterioration in earnings properties should result in accounting earnings becoming a poorer measure of economic performance and reduce the market's ability to anticipate future earnings. Understanding the impact of the deterioration in earnings properties on price informativeness is important because more informative prices lead to more efficient resource allocation. I find that, for non-S&P 500 firms, changes over time in price informativeness are positively related to changes in revenue expense matching (REM). This indicates that, despite the dramatic increase in the amount and quality of financial information available to investors over time, the deterioration in REM negatively impacted the extent to which current prices reflect future earnings information for non-S&P 500 firms. In contrast, for S&P 500 firms, I find that changes in price informativeness are not related to changes in REM, indicating that the deterioration in REM did not inhibit the market's ability to anticipate future earnings for S&P 500 firms. Thus, I provide an explanation for the differential trend in price informativeness between S&P 500 firms and the full sample of firms documented by Bai et al. (2016), namely, the differential impact of changes in REM on the market's ability to anticipate future earnings for S&P 500 firms vs. non-S&P 500 firms."--Page vi.
Author: AICPA
Publisher: John Wiley & Sons
ISBN: 1945498870
Category : Business & Economics
Languages : en
Pages : 800
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Book Description
Updated for new accounting and auditing guidance issued, this valuable tool provides hundreds of high quality disclosure examples from carefully selected U.S. companies of different sizes, across industries such as banking, credit and insurance, communication services, and healthcare from such organizations as Scotts Miracle-Gro, Coca-Cola, Caterpillar, and BB&T. Illustrations of the most important, immediate, and challenging disclosures, such as derivatives and hedging, consolidations, and fair value measurement are provided. Hot topics include statement of cash flows, going concern, and business combinations and intangibles. This edition also provides clear, direct guidance to help you understand and comply with all significant reporting requirements and detailed indexes to help you quickly find exactly what you need.
Author: Jeffery S. Abarbanell
Publisher:
ISBN:
Category : Stocks
Languages : en
Pages : 30
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Book Description
Author: Lawrence D. Brown
Publisher:
ISBN:
Category :
Languages : en
Pages : 17
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Book Description
The extant literature has concluded that stock prices do not fully reflect the implications of current earnings for future earnings. This evidence is based on random samples of firms, whose quarterly earnings are assumed to be generated by the same, relatively complex, Brown-Rozeff (1979, BR hereafter) process. It is conceivable that model complexity is the source of the market's failure to fully reflect the implications of current earnings for future earnings. The purpose of this study is to determine whether stock prices fully reflect the implications of current earnings for future earnings for a subset of firms whose quarterly earnings generating process is much simpler than the BR model. For the entire sample of AR1 firms, we find that stock prices do not fully reflect the implications of current quarterly earnings for future quarterly earnings. They erroneously act as if the error of the AR1 model at lag four has negative valuation implications. When we segment the sample by several proxy variables for firms' information environments (i.e., firm size, number of institutional shareholders, and the existence of security analyst following), we find that the failure of stock prices to fully reflect the implications of current quarterly earnings for future quarterly earnings pertains only to firms with less predisclosure information. When we examine the relation between current earnings surprise and contemporaneous and future CARs, we obtain additional insights into what stock prices do not understand about firms with less predisclosure information. For firms with less predisclosure information, the failure of stock prices to fully reflect the implications of current quarterly earnings for future quarterly earnings pertains to large positive surprises, but not to large negative ones.
Author: Dan Weiss
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This paper proposes a new index to extract forward-looking information from security prices and infer market participants' expectations of future earnings. The index, called market-adapted earnings (MAE), utilizes stock returns and fundamental accounting signals to estimate market expectations of future earnings at the firm level. MAE outperforms time-series models (e.g., random walk) in predicting future earnings. Results demonstrate the usefulness of MAE for firms with no analyst following.
Author: Michael S. Drake
Publisher:
ISBN:
Category :
Languages : en
Pages : 56
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Book Description
We examine whether policy uncertainty triggered by presidential elections pushes the future back by reducing the extent to which current prices reflect information about future earnings. We estimate future earnings response coefficients (FERCs) for the years 1975-2013, a period that covers ten presidential elections. We find that FERCs are significantly lower (by 11.8 percent) during presidential election years compared to other years. Additional analyses using pseudo election years, ex-ante polls, contract prices from the Iowa Electronic Political Market, and cross-sectional firm characteristics provide corroborating evidence that the lower FERCs during election years are related to policy uncertainty. We also investigate potential explanations for the lower FERCs during election years. We find that the lower FERCs relate to forecasting difficulty rather than to changes in the discount rate or in the amount of noise trading. Finally, we find that market prices move toward future earnings to a greater degree during presidential election years compared with other years once the policy uncertainty is resolved. A trading strategy based on this drift yields significant abnormal returns. Overall, we contribute to the literature by providing the first empirical evidence that shocks to policy uncertainty influence the pricing of earnings information.
