Earnings volatility and earnings predictability

Ilia D. Dichev and Vicki Wei Tang

Journal of Accounting and Economics, 2009, vol. 47, issue 1-2, pages 160-181

Abstract: 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; Analyst; forecasts; Fundamental; analysis (search for similar items in EconPapers)
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:eee:jaecon:v:47:y:2009:i:1-2:p:160-181

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Journal of Accounting and Economics is edited by J. L. Zimmerman, S. P. Kothari, T. Z. Lys and R. L. Watts

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