scholarly journals Impact of Earnings Smoothness on Stock Prices, Stock Returns and Future Earnings Changes - the Polish Experience

2014 ◽  
Vol 9 (3) ◽  
pp. 67-94
Author(s):  
Jacek Welc
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Future Earnings ◽  
Polish Experience ◽  
Earnings Smoothness

Discussion—Innovation, Future Earnings, and Market Efficiency

2005 ◽  
Vol 20 (4) ◽  
pp. 419-422 ◽  
Author(s):  
Chandra Seethamraju
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Citation Impact ◽  
Earnings Forecasts ◽  
Patent Citation ◽  
Time Lags ◽  
Future Earnings ◽  
Market Participants ◽  
Technological Advances ◽  
Abnormal Stock Returns

This study considers patent citation impact as a proxy for a leading indicator of technology firms' innovation capabilities. The author examines whether patent citation impact is associated with future earnings and whether this association is appropriately reflected in stock prices and analysts' earnings forecasts of patent-rich companies. The author reports results which indicate that change of patent citation impact is positively associated with future earnings up to five years in the future, particularly in the computer, electronics, and medical equipment industries. These are industries with relatively short time lags between technological advances and profit realization. The author also reports that investors and analysts do not seem to fully incorporate the implication of enhanced innovation capabilities for future earnings into stock prices and earnings forecasts. Based on this information, the paper develops a trading strategy that generates future abnormal stock returns. In my view, this paper asks an important question. If a researcher could come up with an appropriate leading measure of innovation, then examining the reliability of that measure through its association with future benefits, and whether the implications of the measure are understood by market participants, is an interesting exercise. In my discussion, I will focus on (a) some of the issues with the patent citation index (the measure of innovation capabilities), (b) problems with the databases used to construct this measure which suggest that the results should be interpreted with caution, and (c) some additional comments on the mispricing and portfolio tests.

A model of stock prices leading earnings

2018 ◽  
Vol 44 (7) ◽  
pp. 935-952
Author(s):  
Jay Junghun Lee
Keyword(s):  
Stock Returns ◽  
Analytical Model ◽  
Stock Prices ◽  
Time Lag ◽  
Relevant Information ◽  
Content Type ◽  
Future Earnings ◽  
Earnings Response Coefficient ◽  
Response Coefficient ◽  
Earnings Response

Purpose Prior literature suggests that stock prices lead earnings in reflecting value-relevant information because accounting income incorporates information discretely to satisfy recognition principles while stock prices incorporate it continuously. The purpose of this paper is to derive an analytical model that relates the time lag of earnings to the incremental informativeness of future anticipated earnings in equity prices after controlling for current realized earnings. Design/methodology/approach This study models the extent to which forward-looking information about future earnings is capitalized into current stock returns. Specifically, this study derives an analytical future earnings response coefficient (FERC) model that regresses current stock returns on both current and future earnings surprises, and examines the properties of the regression coefficients on current earnings (i.e. current earnings response coefficient, CERC) and future earnings (i.e. FERC). Findings The analytical FERC model shows that the pricing coefficient on future earnings (FERC) is positive in the presence of stock prices leading earnings. More importantly, the pricing coefficient on future earnings (FERC) increases with the recognition lag, but the pricing coefficient on current earnings (CERC) decreases with the lag. The results suggest that recognition principles that intend to enhance the reliability of earnings inadvertently lower the timeliness of earnings and, thus, shift the investors’ demand for value-relevant information from current realized earnings to future anticipated earnings. Originality/value This study makes two major contributions. First, it fills the gap between the lack of an analytical model and the abundance of empirical findings in previous FERC studies. As the recognition lag of earnings increases, stock investors shift the pricing weight on value-relevant information from current realized earnings to future anticipated earnings. Second, it provides support for the validity of the FERC model as an empirical model that examines the lack of earnings timeliness. As the timeliness of earnings relative to stock prices declines, the FERC increases but the CERC decreases.

scholarly journals Innovation, Future Earnings, and Market Efficiency

2005 ◽  
Vol 20 (4) ◽  
pp. 385-418 ◽  
Author(s):  
Feng Gu
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Citation Impact ◽  
Earnings Forecasts ◽  
Patent Citation ◽  
Future Market ◽  
Time Lags ◽  
Future Earnings ◽  
Technological Advances ◽  
Abnormal Stock Returns

This study examines whether patent citation impact, a leading indicator of technology firms' innovation capabilities, is associated with future earnings and whether this association is appropriately reflected in stock prices and analysts' earnings forecasts of patent-rich companies. The results indicate that change of patent citation impact is positively associated with future earnings, particularly in industries with relatively short time lags between technological advances and profit realization (e.g., computers, electronics, and medical equipment). The strength of this relation also significantly increases with time for up to five years in the future. Market participants, including investors and analysts, however, do not fully incorporate the implication of enhanced innovation capabilities for future earnings into stock prices and earnings forecasts. This bias is significantly associated with future abnormal stock returns.

Research of Building Intelligent Investment Decision Mode for Investment Portfolio — Using Taiwan Electronic Stock as an Example

2010 ◽  
Vol 13 (04) ◽  
pp. 621-645 ◽  
Author(s):  
Wen-Rong Jerry Ho ◽  
C. H. Liu ◽  
H. W. Chen
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Stock Exchange ◽  
Investment Decision ◽  
Investment Strategy ◽  
Return Rate ◽  
Selection Strategy ◽  
Stock Selection ◽  
Taiwan Stock Exchange ◽  
Book To Market Ratio

This research uses all of the listed electronic stocks in the Taiwan Stock Exchange as a sample to test the performance of the return rate of stock prices. In addition, this research compares it with the electronic stock returns. The empirical result shows that no matter which kind of stock selection strategy we choose, a majority of the return rate is higher than that of the electronics index. Evident in the results, the predicted effect of BPNN is better than that of the general average decentralized investment strategy. Furthermore, the low price-to-earning ratio and the low book-to-market ratio have a significant long-term influence.

Studying the Effect of Changing the Managing Director on the Abnormal Returns of Shares of Companies Listed on the Iraqi Stock Exchange

2021 ◽  
Vol 39 (11) ◽  
Author(s):  
Hussein Hasan ◽  
Hudaa Nadhim Khalbas ◽  
Farqad Mohammed Bakr AL Saadi
Keyword(s):  
Stock Returns ◽  
Significant Relationship ◽  
Stock Prices ◽  
Market Reaction ◽  
Stock Exchange ◽  
Hypothesis Test ◽  
Abnormal Returns ◽  
The Other ◽  
Other Hand ◽  
Abnormal Stock Returns

The aim of this research is to study the market reaction to the change of the managing director and how this change affects the abnormal returns of the shares. The research is based on the information published by the companies listed on the Iraq Stock Exchange, and 35 companies were selected for the period from 2015 to 2019. The results of the hypothesis test for this study show that there is a negative and significant relationship between the change of the managing director and abnormal stock returns. On the other hand, investors undervalue stock prices when changing CEOs. As a result, the stock returns are less than expected.

Perbandingan harga saham, volume transaksi dan return saham sebelum dan sesudah terjadi pandemi covid-19 pada PT Agung Podomoro Land, Tbk

2021 ◽  
Vol 5 (4) ◽  
pp. 720
Author(s):  
Anggun Putri Romadhina ◽  
Eka Kusuma Dewi
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Stock Price ◽  
Research Data ◽  
Paired Sample ◽  
First Case ◽  
Significant Difference ◽  
Before And After ◽  
Stock Transaction

The first Covid-19 case in Indonesia was announced on March 2, 2020. This study aims to determine whether there is a significant difference in stock prices, stock transaction volume and stock returns due to the COVID-19 pandemic (case study at PT. Agung Podomoro Land, Tbk). This research data was taken 90 days before and 90 days after the announcement of the first case of COVID-19 in Indonesia. The data was processed by paired sample t-test, using SPSS version 20. From the results of data processing, it was shown that there was a significant difference in stock prices before and after the announcement of the first case of covid-19 in Indonesia. This is indicated by a significance value of 0.000 < 0.05 where the stock price has decreased compared to before the Covid-19 case. Meanwhile, the volume of stock transactions also showed a significant difference with a significance value of 0.007 <0.05, where the volume of stock transactions after the announcement showed a decrease. Likewise, stock returns show a significant difference with a significance value of 0.025 < 0.05 where stock returns have decreased after the announcement of the first case of covid-10 in Indonesia.  

scholarly journals Unknown Unknowns: Uncertainty About Risk and Stock Returns

2018 ◽  
Vol 53 (4) ◽  
pp. 1615-1651 ◽  
Author(s):  
Guido Baltussen ◽  
Sjoerd van Bekkum ◽  
Bart van der Grient
Keyword(s):  
United States ◽  
Stock Returns ◽  
Stock Prices ◽  
Stock Markets ◽  
The United States ◽  
Pricing Mechanism ◽  
European Stock Markets ◽  
Low Uncertainty ◽  
High Uncertainty

Stocks with high uncertainty about risk, as measured by the volatility of expected volatility (vol-of-vol), robustly underperform stocks with low uncertainty about risk by 8% per year. This vol-of-vol effect is distinct from (combinations of) at least 20 previously documented return predictors, survives many robustness checks, and holds in the United States and across European stock markets. We empirically explore the pricing mechanism behind the vol-of-vol effect. The evidence points toward preference-based explanations and away from alternative explanations. Collectively, our results show that uncertainty about risk is highly relevant for stock prices.

scholarly journals Analysis of Asset Growth Anomaly on Cross-Section Stock Returns: Evidence from Indonesia Stock Exchange

2017 ◽  
Vol 20 (1) ◽  
pp. 47
Author(s):  
Muhammad Iqbal ◽  
Buddi Wibowo
Keyword(s):  
Risk Factor ◽  
Stock Returns ◽  
Cross Section ◽  
Stock Prices ◽  
Stock Exchange ◽  
High Growth ◽  
Growth Effect ◽  
Market Anomalies ◽  
Growth Anomaly ◽  
Asset Growth

Assorted types of market anomalies occur when stock prices deviate from the prediction of classical asset pricing theories. This study aims to examine asset growth anomaly where stocks with high asset growth will be followed by low returns in the subsequent periods. This study, using Indonesia Stock Exchanges data, finds that an equally-weighted low-growth portfolio outperforms high-growth portfolio by average 0.75% per month (9% per annum), confirming existence of asset growth anomaly. The analysis is extended at individual stock-level using fixed-effect panel regression in which asset growth effect remains significant even with controlling other variables of stock return determinants. This study also explores further whether asset growth can be included as risk factor. Employing two-stage cross-section regression in Fama and Macbeth (1973), the result aligns with some prior studies that asset growth is not a new risk factor; instead the anomaly is driven by mispricing due to investors’ overreaction and psychological bias. This result imply that asset growth anomaly is general phenomenon that can be found at mostly all stock market but in Indonesia market asset growth anomaly rise from investors’ overreaction, instead of  playing as a factor of risk.

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