Returns-Earnings Regressions: An Integrated Approach

Abstract:     
In this paper, we assess the degree to which ERCs reported in the literature may be attenuated due to measurement errors in the proxies for the earnings expected by the market. We use the cross-sectional dispersion of analyst forecasts as a variable to calibrate the measurement error inherent in these proxies. We explore whether forecast dispersion is inversely related to the magnitude of ERCs, and whether ERCs approach their theoretical values as the dispersion decreases sufficiently.

Number of Pages in PDF File: 43

JEL Classification: G12, G14, M41, G29

working papers series