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The Persistence of Earnings per Share

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Author Info
Luis A. Gil-Alana () (Facultad de Ciencias Económicas y Empresariales, Universidad de Navarra)
Rolando Pelaez () (University of Houston-Downtown, Houston, USA)

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Abstract

This paper employs various empirical tests in order to measure the persistence of shocks to EPS for the S&P 500 index. Within the I(0)/I(1) paradigm the empirical evidence rejects the I(1) specification, supporting instead a trend-stationary representation. When fractional orders of integration are considered, the results indicate that the series is long memory (d > 0) and mean reverting (d < 1). The responses decay slowly to zero, albeit 50 quarters after an initial shock the responses remain significantly different from zero. Likewise, the variance ratio evidence suggests that the effect of a shock persists over time spans characteristic of the business cycle.

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Paper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 08/08.

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Length: 27 pages
Date of creation: 20 Nov 2008
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Handle: RePEc:una:unccee:wp0808

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