IDEAS home Printed from https://ideas.repec.org/a/spr/reaccs/v9y2004i2d10.1023_brast.0000028184.06279.57.html
   My bibliography  Save this article

The Role of Expectations in Explaining the Cross-Section of Stock Returns

Author

Listed:
  • Tom Copeland

    (Monitor Group and Harvard Business School)

  • Aaron Dolgoff

    (Charles River Associates)

  • Alberto Moel

    (Hong Kong University of Science and Technology)

Abstract

We find highly significant results when the cross-section of market-adjusted stock returns is regressed against changes in analyst expectations this year about: (1) this year's earnings, (2) next year's earnings, (3) long-term earnings growth, and (4) noise (measured as the standard deviation of analyst forecasts). Surprisingly, changes in expectations about this year's earnings are not significant in a multiple regression with the other independent variables. Changes in expectations about next year's earnings are highly significant but with an impact that is much smaller than that of changes in expectations about the long-term growth in earnings. Changes in noise are also statistically significant and are negatively related to market-adjusted returns, an indication that the signal to noise ratio, rather than merely the signal, is what drives price adjustments to new information.

Suggested Citation

  • Tom Copeland & Aaron Dolgoff & Alberto Moel, 2004. "The Role of Expectations in Explaining the Cross-Section of Stock Returns," Review of Accounting Studies, Springer, vol. 9(2), pages 149-188, June.
    • Handle: RePEc:spr:reaccs:v:9:y:2004:i:2:d:10.1023_b:rast.0000028184.06279.57
    DOI: 10.1023/B:RAST.0000028184.06279.57
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1023/B:RAST.0000028184.06279.57
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1023/B:RAST.0000028184.06279.57?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:reaccs:v:9:y:2004:i:2:d:10.1023_b:rast.0000028184.06279.57. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.