The explanatory power of representative agent earnings momentum models

The explanatory power of representative agent earnings momentum models This paper examines the predictive performance of two representative agent models of earnings momentum using the US S & P 500 sample frame in the years 1991–2006. For successive sequences of quarterly earnings outcomes over a three year horizon of quarterly increases/decreases, etc., we ask whether these models can capture the likelihood of reversion and, secondly, the stock market response to observed quarterly earnings change sequences for our chosen sample. We find evidence of a far greater frequency of persistent quarterly earnings rises and hence a more muted reaction to their occurrence. Persistent losses are both far less common and more salient in their impact on stock prices. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

The explanatory power of representative agent earnings momentum models

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Publisher
Springer US
Copyright
Copyright © 2013 by Springer Science+Business Media New York
Subject
Economics / Management Science; Finance/Investment/Banking; Accounting/Auditing; Econometrics; Operations Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-013-0414-4
Publisher site
See Article on Publisher Site

Abstract

This paper examines the predictive performance of two representative agent models of earnings momentum using the US S & P 500 sample frame in the years 1991–2006. For successive sequences of quarterly earnings outcomes over a three year horizon of quarterly increases/decreases, etc., we ask whether these models can capture the likelihood of reversion and, secondly, the stock market response to observed quarterly earnings change sequences for our chosen sample. We find evidence of a far greater frequency of persistent quarterly earnings rises and hence a more muted reaction to their occurrence. Persistent losses are both far less common and more salient in their impact on stock prices.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Nov 8, 2013

References

  • A model of investor sentiment
    Barberis, N; Shleifer, A; Vishny, R
  • The rewards to meeting or beating earnings expectations
    Bartov, E; GivolyD Hayn, C

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