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dc.contributor.authorLipe, Roberten_US
dc.contributor.authorKormendi, Roger C.en_US
dc.date.accessioned2006-09-11T19:30:12Z
dc.date.available2006-09-11T19:30:12Z
dc.date.issued1994-03en_US
dc.identifier.citationLipe, Robert; Kormendi, Roger; (1994). "Mean reversion in annual earnings and its implications for security valuation." Review of Quantitative Finance and Accounting 4(1): 27-46. <http://hdl.handle.net/2027.42/47883>en_US
dc.identifier.issn0924-865Xen_US
dc.identifier.issn1573-7179en_US
dc.identifier.urihttps://hdl.handle.net/2027.42/47883
dc.description.abstractThis article documents the long-horizon mean reverting character of annual earnings and tests the implications of such mean reversion for security valuation. First, both theory-based and nonparametric measures of earnings persistence decrease as the estimation order increases, revealing 40 percent less long-horizon persistence than expected under the commonly used random walk model. Second, the return responses to the earnings shocks are more closely related across firms to the higher-order measures of persistence that reflect significant long-horizon mean reversion. Third, the persistence measure derived from classical valuation theory outperforms the generic measure in explaining the return responses. Taken as a whole, these results provide evidence for significant mean reversion in the higher-order properties of earnings and for the stock market incorporating these properties in a manner consistent with classical valuation theory.en_US
dc.format.extent1629321 bytes
dc.format.extent3115 bytes
dc.format.mimetypeapplication/pdf
dc.format.mimetypetext/plain
dc.language.isoen_US
dc.publisherKluwer Academic Publishers; Springer Science+Business Mediaen_US
dc.subject.otherEconomics / Management Scienceen_US
dc.subject.otherEconometricsen_US
dc.subject.otherAccounting/Auditingen_US
dc.subject.otherFinance /Bankingen_US
dc.subject.otherOperation Research/Decision Theoryen_US
dc.subject.otherEarnings Persistenceen_US
dc.subject.otherMean Reversionen_US
dc.subject.otherSecurity Valuationen_US
dc.subject.otherHigher-order Propertiesen_US
dc.titleMean reversion in annual earnings and its implications for security valuationen_US
dc.typeArticleen_US
dc.subject.hlbsecondlevelEconomicsen_US
dc.subject.hlbtoplevelBusinessen_US
dc.description.peerreviewedPeer Revieweden_US
dc.contributor.affiliationumSchool of Business Administration, University of Michigan, 48109, Ann Arbor, MIen_US
dc.contributor.affiliationotherCollege of Business and Administration, University of Colorado, Campus Box 419, 80309-0419, Boulder, COen_US
dc.contributor.affiliationumcampusAnn Arboren_US
dc.description.bitstreamurlhttp://deepblue.lib.umich.edu/bitstream/2027.42/47883/1/11156_2005_Article_BF01082663.pdfen_US
dc.identifier.doihttp://dx.doi.org/10.1007/BF01082663en_US
dc.identifier.sourceReview of Quantitative Finance and Accountingen_US
dc.owningcollnameInterdisciplinary and Peer-Reviewed


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