Journal of Accounting and Economics, Forthcoming
57 Pages Posted: 30 Aug 2006 Last revised: 22 Feb 2012
Date Written: Spetember 19, 2008
Survey evidence indicates widely held managerial beliefs that earnings volatility is negatively related to earnings predictability. In addition, existing research suggests that earnings volatility is determined by economic and accounting factors, and both of these factors reduce earnings predictability. We find that the consideration of earnings volatility brings substantial improvements in the prediction of both short and long-term earnings. Conditioning on volatility information also allows one to identify systematic errors in analyst forecasts, which implies that analysts do not fully understand the implications of earnings volatility for earnings predictability.
Keywords: earnings volatility, earnings predictability
JEL Classification: M41
Suggested Citation: Suggested Citation
Dichev, Ilia D. and Tang, Vicki Wei, Earnings Volatility and Earnings Predictability (Spetember 19, 2008). Journal of Accounting and Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=927305 or http://dx.doi.org/10.2139/ssrn.927305