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Article: How do accounting variables explain stock price movements? Theory and evidence

TitleHow do accounting variables explain stock price movements? Theory and evidence
Authors
KeywordsProfitability (ROE)
Earnings yield
Stock return
Accounting variables
Capital investment
Growth opportunity
Issue Date2007
Citation
Journal of Accounting and Economics, 2007, v. 43, n. 2-3, p. 219-244 How to Cite?
AbstractThis paper provides theory and evidence showing how accounting variables explain cross-sectional stock returns. Based on Zhang, G. [2000. Accounting information, capital investment decisions, and equity valuation: theory and empirical implications. Journal of Accounting Research 38, 271-295], who relates equity value to accounting measures of underlying operations, we derive returns as a function of earnings yield, equity capital investment, and changes in profitability, growth opportunities, and discount rates. Empirical results confirm the predicted roles of all identified factors. The model explains about 20% of the cross-sectional return variation, with cash-flow-related factors (as opposed to changes in discount rates) accounting for most of the explanatory power. The properties of the model are robust across various subsamples and periods. © 2007 Elsevier B.V. All rights reserved.
Persistent Identifierhttp://hdl.handle.net/10722/233778
ISSN
2015 Impact Factor: 3.535
2015 SCImago Journal Rankings: 6.834

 

DC FieldValueLanguage
dc.contributor.authorChen, Peter-
dc.contributor.authorZhang, Guochang-
dc.date.accessioned2016-09-27T07:21:37Z-
dc.date.available2016-09-27T07:21:37Z-
dc.date.issued2007-
dc.identifier.citationJournal of Accounting and Economics, 2007, v. 43, n. 2-3, p. 219-244-
dc.identifier.issn0165-4101-
dc.identifier.urihttp://hdl.handle.net/10722/233778-
dc.description.abstractThis paper provides theory and evidence showing how accounting variables explain cross-sectional stock returns. Based on Zhang, G. [2000. Accounting information, capital investment decisions, and equity valuation: theory and empirical implications. Journal of Accounting Research 38, 271-295], who relates equity value to accounting measures of underlying operations, we derive returns as a function of earnings yield, equity capital investment, and changes in profitability, growth opportunities, and discount rates. Empirical results confirm the predicted roles of all identified factors. The model explains about 20% of the cross-sectional return variation, with cash-flow-related factors (as opposed to changes in discount rates) accounting for most of the explanatory power. The properties of the model are robust across various subsamples and periods. © 2007 Elsevier B.V. All rights reserved.-
dc.languageeng-
dc.relation.ispartofJournal of Accounting and Economics-
dc.subjectProfitability (ROE)-
dc.subjectEarnings yield-
dc.subjectStock return-
dc.subjectAccounting variables-
dc.subjectCapital investment-
dc.subjectGrowth opportunity-
dc.titleHow do accounting variables explain stock price movements? Theory and evidence-
dc.typeArticle-
dc.description.natureLink_to_subscribed_fulltext-
dc.identifier.doi10.1016/j.jacceco.2007.01.001-
dc.identifier.scopuseid_2-s2.0-34249088688-
dc.identifier.volume43-
dc.identifier.issue2-3-
dc.identifier.spage219-
dc.identifier.epage244-

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