JOURNAL ARTICLE

A Structural Break in the Aggregate Earnings–Returns Relation.

  • Published In: Journal of Financial Econometrics, 2024, v. 22, n. 5. P. 1785 1 of 3

  • Database: Social Sciences Full Text (H.W. Wilson) 2 of 3

  • Authored By: Curtis, Asher; Kim, Chang-Jin; Oh, Hyung Il 3 of 3

Abstract

This study investigates a structural change in the aggregate earnings–returns relation, identifying the break as occurring gradually around the fourth quarter of 1991. The authors find three main sources for this change: an increased importance of cash flow news in stock returns, a decreased role of discount rate news in aggregate earnings, and reduced persistence (predictability) of both aggregate earnings and returns. Analysis reveals that improved inventory management systems, reflected in changes to aggregate inventory accruals, largely drive the structural shift, linking the findings to the broader economic phenomenon known as the Great Moderation. Robustness checks confirm these results across various model specifications and sample adjustments.

Additional Information

  • Source:Journal of Financial Econometrics. 2024/10, Vol. 22, Issue 5, p1785
  • Document Type:Article
  • Subject Area:Business and Management
  • Publication Date:2024
  • ISSN:14798409
  • DOI:10.1093/jjfinec/nbae015
  • Accession Number:181541395
  • Copyright Statement:Copyright of Journal of Financial Econometrics is the property of Oxford University Press / USA and its content may not be copied or emailed to multiple sites without the copyright holder's express written permission. Additionally, content may not be used with any artificial intelligence tools or machine learning technologies. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

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