A Comment on 'the Information Content of Earnings and Prices: A Simultaneous Equations Approach' by W.H. Beaver, M.L. Mcanally, and C.H. Stinson (1997)
27 Pages Posted: 17 May 1999
Date Written: April 1999
Abstract
We comment on a recent paper by Beaver, McAnally and Stinson (1997), drawing attention to the fact that their method ignores some recent developments in time-series econometrics. We apply a bi-variate vector autoregression framework to price and earnings data of listed US companies and the S&P 500 index to capture the dynamics of this system of equations. Although some series are I(1), cointegration does not exist and consequently we are unable to estimate a vector error correction model. However, by applying generalised variance decomposition and generalised impulse response analysis, we conclude that evidence favours a linkage from prices to earnings.
JEL Classification: C32, G12, M41
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Capital Markets Research in Accounting
By S.p. Kothari
-
What is the Intrinsic Value of the Dow?
By Charles M.c. Lee, James N. Myers, ...
-
Accruals and the Prediction of Future Cash Flows
By Mary E. Barth, Donald P. Cram, ...
-
By Stephen Brown, Kin Lo, ...
-
A Comparison of Dividend, Cash Flow, and Earnings Approaches to Equity Valuation
-
By Mary E. Barth, William H. Beaver, ...
-
Investor Valuation of the Abandonment Option
By Philip G. Berger, Eli Ofek, ...
-
Investor Valuation of the Abandonment Option
By Peter Berger, Eli Ofek, ...
-
Accounting Conservatism, the Quality of Earnings, and Stock Returns
By Stephen H. Penman and Xiao-jun Zhang
-
Ratio Analysis and Equity Valuation
By Doron Nissim and Stephen H. Penman