Stock Prices and Earnings: A History of Research

Posted: 25 Nov 2014

See all articles by Patricia Dechow

Patricia Dechow

USC Marshall School of Business

Richard G. Sloan

University of Southern California - Leventhal School of Accounting

Jenny Zha Giedt

George Washington University - School of Business

Date Written: December 2014

Abstract

Accounting earnings summarize periodic corporate financial performance and are key determinants of stock prices. We review research on the usefulness of accounting earnings, including research on the link between accounting earnings and firm value and research on the usefulness of accounting earnings relative to other accounting and nonaccounting information. We also review research on the features of accounting earnings that make them useful to investors, including the accrual accounting process, fair value accounting, and the conservatism convention. We finish by summarizing research that identifies situations in which investors appear to misinterpret earnings and other accounting information, leading to security mispricing.

Suggested Citation

Dechow, Patricia and Sloan, Richard G. and Zha Giedt, Jenny, Stock Prices and Earnings: A History of Research (December 2014). Annual Review of Financial Economics, Vol. 6, pp. 343-363, 2014. Available at SSRN: https://ssrn.com/abstract=2530476 or http://dx.doi.org/10.1146/annurev-financial-110613-034522

Patricia Dechow (Contact Author)

USC Marshall School of Business ( email )

Los Angeles, CA 90089-0441
United States

Richard G. Sloan

University of Southern California - Leventhal School of Accounting ( email )

Los Angeles, CA 90089-0441
United States

Jenny Zha Giedt

George Washington University - School of Business ( email )

Washington, DC 20052
United States

HOME PAGE: http://www.jennyzha.com

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