Abstract
The paper analyzes the contemporaneous association between market returns and earnings for long return intervals. The research design exploits two fundamental accounting attributes: (i) earnings aggregate over periods, and (ii) expanding the interval over which earnings are determined, is likely to reduce 'measurement errors' in (aggregate) earnings. These concepts lead to the level of (aggregate) earnings as a natural earnings variable for explaining security returns. We hypothesize that the longer the interval over which earnings are aggregated, the higher the cross-sectional correlation between earnings and returns. The empirical findings support this hypothesis. © 1992.
| Original language | English |
|---|---|
| Pages (from-to) | 119-142 |
| Journal | Journal of Accounting and Economics |
| Volume | 15 |
| Issue number | 2-3 |
| DOIs | |
| Publication status | Published - Jun 1992 |
| Externally published | Yes |
Bibliographical note
Publication details (e.g. title, author(s), publication statuses and dates) are captured on an “AS IS” and “AS AVAILABLE” basis at the time of record harvesting from the data source. Suggestions for further amendments or supplementary information can be sent to [email protected].Funding
The authors wish to thank the participants of workshops at the Australian Graduate School of Management, Auckland, University of California, Berkeley, Drexel, Duke, Iowa, Macquarie, Michigan, Monash, Purdue, Queensland, Southern California, Stanford, Texas, and Washington for valuable comments. Special thanks are due D. Shores and Bob Bowen. The last two authors received partial funding from the Faculty Research Fund, Columbia Business School.