|
| | The 'Earnings Quality' area summarizes papers implementing
strategies that exploit predictable changes in future earnings performance resulting
from accounting distortions. Long
positions are taken in securities that are predicted to have increases in
earnings performance and short positions are taken in securities that are
predicted to have decreases in earnings performance.
- Sloan (1996)aaa
-
This paper shows that the accrual component of earnings is less
persistent than the cash flow component of earnings, but that stock prices
do not anticipate this effect.
- Xie (2001)a
-
This paper shows that the accrual result documented by Sloan(1996)
is primarily attributable to 'abnormal' accruals (accruals that are unrelated to
changes in the underlying level of operating activity).
- Penman and Zhang (2002)aa
[Click Here to
Download as PDF]
-
This paper shows that conservative accounting interacts with
changes in investment to produce temporary distortions in earnings, and that
stock prices act as if investors do not understand the temporary nature of
these distortions.
- Richardson et al. (2002)aaa
[Click Here to
Download as PDF]
-
This paper extends Sloan's original definition of accruals to
include investing and financing accruals and shows that these new accruals
add significantly to the forecasting ability with respect to earnings
persistence and future stock returns.
|
