Journal article
The predictive qualities of earnings volatility and earnings uncertainty
Review of accounting studies, Vol.20(1), pp.470-500
03/01/2015
DOI: 10.1007/s11142-014-9308-5
Abstract
This study examines the differential predictive power of past earnings volatility for analyst forecast errors and future returns. Past earnings volatility jointly captures two correlated, but distinct, earnings properties: time-series earnings variation and uncertainty in future earnings. To distinguish between these two earnings properties, we develop a forward-looking measure of earnings uncertainty that has a minimal mechanical link to variation in prior-period earnings realizations and does not rely on analyst forecasts. Our results suggest that future earnings uncertainty, and not time variation in earnings, is associated with overly optimistic future earnings expectations of equity analysts and investors. We provide the first empirical evidence on the relevance of future earnings uncertainty to analysts and investors over 1-year horizons. In addition, we provide empirical evidence showing that forecast dispersion is a poor measure of earnings uncertainty.
Details
- Title: Subtitle
- The predictive qualities of earnings volatility and earnings uncertainty
- Creators
- Dain C. Donelson - The University of Texas at AustinRobert J. Resutek - University of Georgia
- Resource Type
- Journal article
- Publication Details
- Review of accounting studies, Vol.20(1), pp.470-500
- Publisher
- Springer Nature
- DOI
- 10.1007/s11142-014-9308-5
- ISSN
- 1380-6653
- eISSN
- 1573-7136
- Number of pages
- 31
- Language
- English
- Date published
- 03/01/2015
- Academic Unit
- Law Faculty; Accounting
- Record Identifier
- 9984380458602771
Metrics
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