The information contained in the components of earnings
Article Abstract:
The relationship between accounting earnings components and stock returns is examined. Two hypotheses are tested. The first hypothesis is whether six reported components of earnings provide additional information beyond what is contained in the earnings figure. The six components are gross profits, general and administrative expense, depreciation expense, interest expense, income taxes, and other items. The second hypothesis is whether the additional information and the time-series properties of the components are associated. An econometric model is used to test the hypotheses. The results indicate that the components of earnings have significant additional explanatory power. A discussion of the results by Robert N. Freeman is included.
Publication Name: Journal of Accounting Research
Subject: Business
ISSN: 0021-8456
Year: 1986
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Earnings permanence and the incremental information content of cash flows from operations
Article Abstract:
The incremental information power of cash flows from operations and earnings in relation to permanence of earnings is examined, with cash flows being viewed as an additional sign of value. The degree of permanence of earnings was measured by utilizing the extent of change in earnings deflated by beginning-of-period price and present earnings deflated by year-end price. It was shown that security returns were insignificantly affected by transitory earnings. Results also showed that, when the permanence of earnings decreases, the incremental information content of accounting earnings decreases while the incremental content of cash flows from operations increases.
Publication Name: Journal of Accounting Research
Subject: Business
ISSN: 0021-8456
Year: 1996
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Using shrinkage estimators to improve upon time-series model proxies for the security market's expectation of earnings
Article Abstract:
The use of James-Stein (JS) estimators of time series model parameters to improve the earnings forecasts of three specific time-series models is examined. The goal is to provide proxies for the security market's quarterly earnings expectations. The three time-series models used include the Foster, Griffin-Watts, and Brown and Rozeff models. Data was draw for 405 companies with information for the whole period of first quarter in 1962 through fourth quarter in 1980. Results indicate that the use of JS indicators produces better earning surprise proxies than do traditional unconditional least squares indicators.
Publication Name: Journal of Accounting Research
Subject: Business
ISSN: 0021-8456
Year: 1989
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