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Earnings Innovations, Earnings Persistence, and Stock Returns

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Author Info
Kormendi, Roger
Lipe, Robert

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Abstract

This study designs and implements new tests of the information contained in accounting earnings. The authors examine whether the magnitude of the effect of unexpected earnings on stock returns is (positively) correlated with the presen t value of revisions in expected future earnings derived from a univa riate time-series model. By addressing the valuation implications of the time-series properties of earnings, they uncover a new dimension to the information content of earnings and, in the process, find no e vidence that the reactions of stock returns to unexpected earnings ar e excessively volatile. Copyright 1987 by the University of Chicago.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 60 (1987)
Issue (Month): 3 (July)
Pages: 323-45
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Handle: RePEc:ucp:jnlbus:v:60:y:1987:i:3:p:323-45

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  1. stanley c. w. salvary, 2005. "The Accounting Variable And Stock Price Determination," Finance 0502011, EconWPA. [Downloadable!]
  2. P. Van Cauwenberge & I. De Beelde, 2006. "Does The Comprehensive Income Matrix Make Unsophisticated Users Overemphasise Fair Value Income?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 06/400, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
  3. Owen Lamont, 1996. "Earnings and Expected Returns," NBER Working Papers 5671, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Irena Jindrichovska, 2001. "The relationship between accounting numbers and returns: some empirical evidence from the emerging market of the Czech Republic," European Accounting Review, Taylor and Francis Journals, vol. 10(1), pages 107-131, May. [Downloadable!] (restricted)
  5. Clatworthy, Mark A & Pong, Christopher K.M. & Wong, Woon K, 2009. "Auditor Quality and the Role of Accounting Information Flows in Explaining UK Stock Returns," Cardiff Economics Working Papers E2009/9, Cardiff University, Cardiff Business School, Economics Section. [Downloadable!]
  6. Fatma Cebenoyan, 2003. "Operational Efficiency and the Value-Relevance of Earnings," Hunter College Department of Economics Working Papers 301, Hunter College: Department of Economics. [Downloadable!]
  7. John Y. Campbell & Robert J. Shiller, 1988. "Stock Prices, Earnings and Expected Dividends," Cowles Foundation Discussion Papers 858, Cowles Foundation, Yale University. [Downloadable!]
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  8. Ravi Bansal & Amir Yaron, 2000. "Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles," NBER Working Papers 8059, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Takashi Obinata, 2000. "Choice of Pension Discount Rate in Financial Accounting adn Stock Prices," CIRJE F-Series CIRJE-F-82, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  10. Robert Jacobson & Gary Hansen, 2001. "Modeling the competitive process," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 22(4-5), pages 251-263. [Downloadable!]
  11. Gopal Krishnan & Linda Parsons, 2008. "Getting to the Bottom Line: An Exploration of Gender and Earnings Quality," Journal of Business Ethics, Springer, vol. 78(1), pages 65-76, March. [Downloadable!] (restricted)
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