Fundamental Analysis, Future Earnings, and Stock Prices

JOURNAL OF ACCOUNTING RESEARCH, Vol 35, No 1, Spring 1997

Posted: 4 Dec 1996

See all articles by Jeffery S. Abarbanell

Jeffery S. Abarbanell

University of North Carolina (UNC) at Chapel Hill - Finance Area

Brian J. Bushee

University of Pennsylvania - The Wharton School

Multiple version iconThere are 2 versions of this paper

Abstract

This paper examines empirical relations between rules of fundamental analysis and actual future earnings changes, analysts' earnings forecast revisions, and contemporaneous stock returns. Our results indicate that many of the fundamental signals are related to future earnings and forecast revisions in the same way they are related to returns, however some significant exceptions are noted. Conditioning the relations on variables reflecting the macroeconomic, firm-specific and industry-specific contexts in which firms operate provides some further refinement to our understanding of the information contained in the fundamental signals. Additional tests suggest analysts' forecast revisions display generalized underreaction to the future earnings information contained in some of the fundamental signals.

JEL Classification: G12, G14, M41

Suggested Citation

Abarbanell, Jeffery S. and Bushee, Brian J., Fundamental Analysis, Future Earnings, and Stock Prices. JOURNAL OF ACCOUNTING RESEARCH, Vol 35, No 1, Spring 1997, Available at SSRN: https://ssrn.com/abstract=2827

Jeffery S. Abarbanell (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Finance Area ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

Brian J. Bushee

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States
215-898-4872 (Phone)
215-573-2054 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
5,508
PlumX Metrics