Mean reversion in annual earnings and its implications for security valuation
dc.contributor.author | Lipe, Robert | en_US |
dc.contributor.author | Kormendi, Roger C. | en_US |
dc.date.accessioned | 2006-09-11T19:30:12Z | |
dc.date.available | 2006-09-11T19:30:12Z | |
dc.date.issued | 1994-03 | en_US |
dc.identifier.citation | Lipe, 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.issn | 0924-865X | en_US |
dc.identifier.issn | 1573-7179 | en_US |
dc.identifier.uri | https://hdl.handle.net/2027.42/47883 | |
dc.description.abstract | This 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.extent | 1629321 bytes | |
dc.format.extent | 3115 bytes | |
dc.format.mimetype | application/pdf | |
dc.format.mimetype | text/plain | |
dc.language.iso | en_US | |
dc.publisher | Kluwer Academic Publishers; Springer Science+Business Media | en_US |
dc.subject.other | Economics / Management Science | en_US |
dc.subject.other | Econometrics | en_US |
dc.subject.other | Accounting/Auditing | en_US |
dc.subject.other | Finance /Banking | en_US |
dc.subject.other | Operation Research/Decision Theory | en_US |
dc.subject.other | Earnings Persistence | en_US |
dc.subject.other | Mean Reversion | en_US |
dc.subject.other | Security Valuation | en_US |
dc.subject.other | Higher-order Properties | en_US |
dc.title | Mean reversion in annual earnings and its implications for security valuation | en_US |
dc.type | Article | en_US |
dc.subject.hlbsecondlevel | Economics | en_US |
dc.subject.hlbtoplevel | Business | en_US |
dc.description.peerreviewed | Peer Reviewed | en_US |
dc.contributor.affiliationum | School of Business Administration, University of Michigan, 48109, Ann Arbor, MI | en_US |
dc.contributor.affiliationother | College of Business and Administration, University of Colorado, Campus Box 419, 80309-0419, Boulder, CO | en_US |
dc.contributor.affiliationumcampus | Ann Arbor | en_US |
dc.description.bitstreamurl | http://deepblue.lib.umich.edu/bitstream/2027.42/47883/1/11156_2005_Article_BF01082663.pdf | en_US |
dc.identifier.doi | http://dx.doi.org/10.1007/BF01082663 | en_US |
dc.identifier.source | Review of Quantitative Finance and Accounting | en_US |
dc.owningcollname | Interdisciplinary and Peer-Reviewed |
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