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Estimating earnings trend using unobserved components framework

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  • Basistha, Arabinda
  • Kurov, Alexander

Abstract

Regressions for predicting long-term stock returns often use moving averages of earnings as the earnings trend. We show that the earnings trend can be directly estimated using unobserved components models. The estimated trends improve the fit of predictive regressions.

Suggested Citation

  • Basistha, Arabinda & Kurov, Alexander, 2010. "Estimating earnings trend using unobserved components framework," Economics Letters, Elsevier, vol. 107(1), pages 55-57, April.
    • Handle: RePEc:eee:ecolet:v:107:y:2010:i:1:p:55-57
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    References listed on IDEAS

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