NDLI: The predictive qualities of earnings volatility and earnings uncertainty

Content Provider	Springer Nature Link
Author	Donelson, Dain C. Resutek, Robert J.
Copyright Year	2014
Abstract	This study examines the differential predictive power of past earnings volatility for analyst forecast errors and future returns. Past earnings volatility jointly captures two correlated, but distinct, earnings properties: time-series earnings variation and uncertainty in future earnings. To distinguish between these two earnings properties, we develop a forward-looking measure of earnings uncertainty that has a minimal mechanical link to variation in prior-period earnings realizations and does not rely on analyst forecasts. Our results suggest that future earnings uncertainty, and not time variation in earnings, is associated with overly optimistic future earnings expectations of equity analysts and investors. We provide the first empirical evidence on the relevance of future earnings uncertainty to analysts and investors over 1-year horizons. In addition, we provide empirical evidence showing that forecast dispersion is a poor measure of earnings uncertainty.
Starting Page	470
Ending Page	500
Page Count	31
File Format	PDF
ISSN	13806653
Journal	Review of Accounting Studies
Volume Number	20
Issue Number	1
e-ISSN	15737136
Language	English
Publisher	Springer US
Publisher Date	2014-10-24
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Earnings volatility Information uncertainty Earnings prediction Analyst forecasts Asset pricing Accounting/Auditing Finance/Investment/Banking Public Finance & Economics
Content Type	Text
Resource Type	Article
Subject	Accounting

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1	Ministry of Education (GoI), Department of Higher Education	Sanctioning Authority	https://www.education.gov.in/ict-initiatives
2	Indian Institute of Technology Kharagpur	Host Institute of the Project: The host institute of the project is responsible for providing infrastructure support and hosting the project	https://www.iitkgp.ac.in
3	National Digital Library of India Office, Indian Institute of Technology Kharagpur	The administrative and infrastructural headquarters of the project	Dr. B. Sutradhar bsutra@ndl.gov.in
4	Project PI / Joint PI	Principal Investigator and Joint Principal Investigators of the project	Dr. B. Sutradhar bsutra@ndl.gov.in Prof. Saswat Chakrabarti will be added soon
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Accounting conservatism and Street earnings

Analyst information production and the timing of annual earnings forecasts

Anticipation of management forecasts and analysts’ private information search

Analysts’ earnings forecast errors and cost of equity capital estimates

Detailed management earnings forecasts: do analysts listen?

A re-examination of analysts’ superiority over time-series forecasts of annual earnings

Does the midpoint of range earnings forecasts represent managers’ expectations?

A discussion of “Do managers use earnings guidance to influence street earnings exclusions?”

Does earnings acceleration convey information?

The predictive qualities of earnings volatility and earnings uncertainty

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Accounting conservatism and Street earnings

Analyst information production and the timing of annual earnings forecasts

Anticipation of management forecasts and analysts’ private information search

Analysts’ earnings forecast errors and cost of equity capital estimates

Detailed management earnings forecasts: do analysts listen?

A re-examination of analysts’ superiority over time-series forecasts of annual earnings

Does the midpoint of range earnings forecasts represent managers’ expectations?

A discussion of “Do managers use earnings guidance to influence street earnings exclusions?”

Does earnings acceleration convey information?

The predictive qualities of earnings volatility and earnings uncertainty