Earnings Quality and Book-to-Market in the Cross Section of Expected Returns
Multinational Finance Journal, ISSN: 1096-1879, Vol: 23, Issue: 3-4, Page: 169-210
2019
- 1Citations
- 1,120Usage
- 24Captures
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Example: if you select the 1-year option for an article published in 2019 and a metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019. If you select the 3-year option for the same article published in 2019 and the metric category shows 90%, that means that the article or review is performing better than 90% of the other articles/reviews published in that journal in 2019, 2018 and 2017.
Citation Benchmarking is provided by Scopus and SciVal and is different from the metrics context provided by PlumX Metrics.
Article Description
The purpose of this paper is to examine whether earnings quality contributes to the book-to-market’s predictive power in the cross section of stock returns. Earnings quality is embedded in the value-growth effect given that retained earnings is a key part of the book value of equity. Earnings quality reflects the effects of managerial discretion on reported earnings, which has been shown to be associated with both risk and behavioral biases in asset pricing. Our results affirm the existence of a value premium and show that the value premium is more pronounced within poor earnings quality stocks. Moreover, we find that poor earnings quality contributes to the value premium mainly through the pricing of growth stocks. Our results suggest that the quality of reported earnings has an incremental role in shaping expected returns of value versus growth stocks. (JEL: G12, M41).
Bibliographic Details
http://www.scopus.com/inward/record.url?partnerID=HzOxMe3b&scp=85142885150&origin=inward; http://dx.doi.org/10.2139/ssrn.3467747; http://www.scopus.com/inward/record.url?partnerID=HzOxMe3b&scp=85112687178&origin=inward; https://www.ssrn.com/abstract=3467747; https://dx.doi.org/10.2139/ssrn.3467747; https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3467747; https://ssrn.com/abstract=3467747
Elsevier BV
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