The persistence of earnings per share

The persistence of earnings per share The persistence of innovations to accounting earnings per share, EPS, has important implications for equity valuation, yet it remains a largely neglected subject. This paper employs various empirical tests in order to measure the persistence of shocks to EPS for the S&P 500 index. Within the I(0)/I(1) paradigm the empirical evidence rejects the I(1) specification, supporting instead a trend-stationary representation. When fractional orders of integration are considered, the results indicate that the detrended series is long memory (d  >  0) and mean reverting (d < 1). The responses decay slowly to zero, albeit 50 quarters after an initial shock the responses remain significantly different from zero. Likewise, the variance ratio evidence suggests that the effect of a shock persists over time spans characteristic of the business cycle. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

The persistence of earnings per share

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Publisher
Springer US
Copyright
Copyright © 2007 by Springer Science+Business Media, LLC
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-007-0077-0
Publisher site
See Article on Publisher Site

References

  • The time series properties of annual earnings
    Albrecht, WS; Lookabill, L; McKeown, J
  • The effect of taxes on the relative valuation of dividends and capital gains: evidence from dual-class British investment trusts
    Ang, JS; Blackwell, DW; Megginson, WL
  • Long memory processes and fractional integration in econometrics
    Baillie, RT
  • Some time series properties of accounting income
    Ball, R; Watts, R

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