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Can historical returns-earnings relations predict price responses to earnings news?

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  • Robert Freeman
  • Adam Koch
  • Haidan Li

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  • Robert Freeman & Adam Koch & Haidan Li, 2011. "Can historical returns-earnings relations predict price responses to earnings news?," Review of Quantitative Finance and Accounting, Springer, vol. 37(1), pages 35-62, July.
    • Handle: RePEc:kap:rqfnac:v:37:y:2011:i:1:p:35-62
    DOI: 10.1007/s11156-010-0194-z
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    References listed on IDEAS

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    2. Lipe, Robert C. & Bryant, Lisa & Widener, Sally K., 1998. "Do nonlinearity, firm-specific coefficients, and losses represent distinct factors in the relation between stock returns and accounting earnings?," Journal of Accounting and Economics, Elsevier, vol. 25(2), pages 195-214, May.
    3. Atiase, Rk, 1985. "Predisclosure Information, Firm Capitalization, And Security Price Behavior Around Earnings Announcements," Journal of Accounting Research, Wiley Blackwell, vol. 23(1), pages 21-36.
    4. Mayer, Thomas, 1975. "Selecting Economic Hypotheses by Goodness of Fit," Economic Journal, Royal Economic Society, vol. 85(340), pages 877-883, December.
    5. Easton, Peter D. & Harris, Trevor S. & Ohlson, James A., 1992. "Aggregate accounting earnings can explain most of security returns : The case of long return intervals," Journal of Accounting and Economics, Elsevier, vol. 15(2-3), pages 119-142, August.
    6. Teets, Walter R. & Wasley, Charles E., 1996. "Estimating earnings response coefficients: Pooled versus firm-specific models," Journal of Accounting and Economics, Elsevier, vol. 21(3), pages 279-295, June.
    7. Jones, Jefferson P & Morton, Richard M & Schaefer, Thomas F, 2000. "Valuation Implications of Investment Opportunities and Earnings Permanence," Review of Quantitative Finance and Accounting, Springer, vol. 15(1), pages 21-35, July.
    8. Brown, Stephen & Lo, Kin & Lys, Thomas, 1999. "Use of R2 in accounting research: measuring changes in value relevance over the last four decades," Journal of Accounting and Economics, Elsevier, vol. 28(2), pages 83-115, December.
    9. Collins, Daniel W. & Kothari, S. P., 1989. "An analysis of intertemporal and cross-sectional determinants of earnings response coefficients," Journal of Accounting and Economics, Elsevier, vol. 11(2-3), pages 143-181, July.
    10. Matthew C. Clayton & Jay C. Hartzell & Joshua Rosenberg, 2005. "The Impact of CEO Turnover on Equity Volatility," The Journal of Business, University of Chicago Press, vol. 78(5), pages 1779-1808, September.
    11. Freeman, Rn & Tse, Sy, 1992. "A Nonlinear Model Of Security Price Responses To Unexpected Earnings," Journal of Accounting Research, Wiley Blackwell, vol. 30(2), pages 185-209.
    12. Lee, Charles M C & Mucklow, Belinda & Ready, Mark J, 1993. "Spreads, Depths, and the Impact of Earnings Information: An Intraday Analysis," The Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 345-374.
    13. Kothari, S. P., 2001. "Capital markets research in accounting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 105-231, September.
    14. Yohn, Teri Lombardi, 1998. "Information Asymmetry around Earnings Announcements," Review of Quantitative Finance and Accounting, Springer, vol. 11(2), pages 165-182, September.
    15. Dechow, Patricia M., 1994. "Accounting earnings and cash flows as measures of firm performance : The role of accounting accruals," Journal of Accounting and Economics, Elsevier, vol. 18(1), pages 3-42, July.
    16. Kenneth Lorek & G. Willinger, 2007. "The contextual nature of the predictive power of statistically-based quarterly earnings models," Review of Quantitative Finance and Accounting, Springer, vol. 28(1), pages 1-22, January.
    17. Elliott, JA & Hanna, JD, 1996. "Repeated accounting write-offs and the information content of earnings," Journal of Accounting Research, Wiley Blackwell, vol. 34, pages 135-155.
    18. Bodnar, Gordon M. & Weintrop, Joseph, 1997. "The valuation of the foreign income of US multinational firms: a growth opportunities perspective," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 69-97, December.
    19. Hsiao-Tien Pao & Yao-Yu Chih, 2005. "Comparison of Linear and Nonlinear Models for Panel Data Forecasting: Debt Policy in Taiwan," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 8(03), pages 525-541.
    20. Samuel Tung, 2000. "The Effect of Information Asymmetry on Bid-Ask Spreads Around Earnings Announcements by NASDAQ Firms," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 3(03), pages 331-346.
    21. Kormendi, Roger & Lipe, Robert, 1987. "Earnings Innovations, Earnings Persistence, and Stock Returns," The Journal of Business, University of Chicago Press, vol. 60(3), pages 323-345, July.
    22. Lang, M, 1991. "Time-Varying Stock-Price Response To Earnings Induced By Uncertainty About The Time-Series Process Of Earnings," Journal of Accounting Research, Wiley Blackwell, vol. 29(2), pages 229-257.
    23. Steven Cahan & David Emanuel & Jerry Sun, 2009. "The effect of earnings quality and country-level institutions on the value relevance of earnings," Review of Quantitative Finance and Accounting, Springer, vol. 33(4), pages 371-391, November.
    24. Kallapur, Sanjay, 1994. "Dividend payout ratios as determinants of earnings response coefficients : A test of the free cash flow theory," Journal of Accounting and Economics, Elsevier, vol. 17(3), pages 359-375, May.
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    Cited by:

    1. Helena Isidro & José G. Dias, 2017. "Earnings quality and the heterogeneous relation between earnings and stock returns," Review of Quantitative Finance and Accounting, Springer, vol. 49(4), pages 1143-1165, November.
    2. Hsieh, Su-Jane & Su, Yuli, 2015. "The economic implications of the earnings impact from lease capitalization," Advances in accounting, Elsevier, vol. 31(1), pages 42-54.

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    More about this item

    Keywords

    Capital markets; Returns-earnings relations; M40; C20;
    All these keywords.

    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General

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