SOME TIME SERIES PROPERTIES OF ACCOUNTING INCOME

SOME TIME SERIES PROPERTIES OF ACCOUNTING INCOME . .. .. where E is an expectation operator. The martingale is a specific case of a submartingale. The sequence {Y,} i a martingale if s E Y + IYo,.,Yt) Yt (,, .. = 663 f o r d t. The Joiimal of Finance smoothing. To our knowledge, no study has addressed the possible futility of alleged smoothing practices. As it is presented in the literature, smoothing is an attempt to reduce the variance of income around its expectation. Income is assumed to be generated by a process whose expectation is constant or is a deterministic function of time? For example, Schiff writes [36, p. 661 : Some years ago, Boulding referred to the “homeostasis of the balance sheet-that there is some desired quantity of all the various items in the balance sheet, and that any disturbance of this structure immediately sets in motion forces which restore the status quo.” I t can be suggested that we now have a “homeostasis of earnings per share” and that the application of generally accepted accounting principles facilitates the reporting of earnings per share in a constant or rising pattern . . . . Gordon writes [22, p. 2231 : If http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

SOME TIME SERIES PROPERTIES OF ACCOUNTING INCOME

Ball, Ray; Watts, Ross
The Journal of Finance, Volume 27 (3) – Jun 1, 1972
19 pages
Read Article

Loading next page...
 
/lp/wiley/some-time-series-properties-of-accounting-income-kUOOOOVxIi
Publisher
Wiley
Copyright
1972 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1972.tb00991.x
Publisher site
See Article on Publisher Site

Abstract

. .. .. where E is an expectation operator. The martingale is a specific case of a submartingale. The sequence {Y,} i a martingale if s E Y + IYo,.,Yt) Yt (,, .. = 663 f o r d t. The Joiimal of Finance smoothing. To our knowledge, no study has addressed the possible futility of alleged smoothing practices. As it is presented in the literature, smoothing is an attempt to reduce the variance of income around its expectation. Income is assumed to be generated by a process whose expectation is constant or is a deterministic function of time? For example, Schiff writes [36, p. 661 : Some years ago, Boulding referred to the “homeostasis of the balance sheet-that there is some desired quantity of all the various items in the balance sheet, and that any disturbance of this structure immediately sets in motion forces which restore the status quo.” I t can be suggested that we now have a “homeostasis of earnings per share” and that the application of generally accepted accounting principles facilitates the reporting of earnings per share in a constant or rising pattern . . . . Gordon writes [22, p. 2231 : If

Journal

The Journal of Finance – Wiley

Published: Jun 1, 1972

References

  • “Distribution of the Serial Correlation Coefficient,”
    Anderson, Anderson
  • “An Empirical Evaluation of Accounting Income Numbers,”
    Ball, Ball; Brown, Brown
  • “Portfolio Theory and Accounting,”
    Ball, Ball; Brown, Brown
  • “Some Preliminary Findings on the Association Between the Earnings of a Firm, Its Industry, and the Economy,” Empirical Research in Accounting: Selected Studies, 1967
    Brown, Brown; Ball, Ball
  • “Income Smoothing.” Empirical Research in Accounting: Selected Studies, 1968
    Copeland, Copeland
  • “A Note on Income Smoothing,”
    Copeland, Copeland; Licastro, Licastro
  • “The Consensus and Accuracy of Some Predictions of the Growth of Corporate Earnings,”
    Cragg, Cragg; Malkiel, Malkiel
  • “The Effect of Alternative Accounting Rules for Non‐subsidiary Investments.” Empirical Research in Accounting: Selected Studies, 1966
    Dopuch, Dopuch; Drake, Drake
  • “The Behavior of Stock Market Prices,”
    Fama, Fama
  • “Efficient Capital Markets: A Review of Theory and Empirical Work,”
    Fama, Fama
  • “Dividend Policy: An Empirical Analysis,”
    Fama, Fama; Babiak, Babiak
  • “The Adjustment of Stock Prices to New Information,”
    Fama, Fama; Babiak, Babiak; Fisher, Fisher; Jensen, Jensen; Roll, Roll
  • “Some New Stock Market Indices,”
    Fisher, Fisher
  • “Purchase Versus Pooling of Interests: The Search for a Predictor,”
    Gagnon, Gagnon
  • “Postulates, Principles and Research in Accounting,”
    Gordon, Gordon
  • Discussion of Dopuch and Drake (14). Empirical Research in Accounting: Selected Studies, 1966
    Gordon, Gordon
  • “Tabulation of the Probabilities of the Ratio of the Mean Square Successive Difference to the Variance,”
    Hart, Hart; Neumann, Neumann
  • “Smoothing Periodic Income,”
    Hepworth, Hepworth
  • “Higgledy Piggledy Growth,”
    Little, Little
  • “Optimal Properties of Exponentially Weighted Forecasts,”
    Muth, Muth
  • “Australian Share Prices and the Random Walk Hypothesis.”
    Praetz, Praetz
  • “Accounting Tactics and the Theory of the Firm,”
    Schiff, Schiff
  • “On a Test of Whether Two Samples are from the Same Population,”
    Wald, Wald; Wolfowitz, Wolfowitz

You’re reading a free preview. Subscribe to read the entire article.

Try 2 weeks free now

DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

or browse the journals available

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create folders to
organize your research

Export folders, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off

Sign up
for free
Start 14 day
Free Trial