Stock Prices and Earnings: A History of Research

Patricia M. Dechow, Richard G. Sloan and Jenny Zha Giedt

Annual Review of Financial Economics, 2014, vol. 6, issue 1, 343-363

Abstract: Accounting earnings summarize periodic corporate financial performance and are key determinants of stock prices. We review research on the usefulness of accounting earnings, including research on the link between accounting earnings and firm value and research on the usefulness of accounting earnings relative to other accounting and nonaccounting information. We also review research on the features of accounting earnings that make them useful to investors, including the accrual accounting process, fair value accounting, and the conservatism convention. We finish by summarizing research that identifies situations in which investors appear to misinterpret earnings and other accounting information, leading to security mispricing.

Keywords: earnings; stock prices; accruals; conservatism; fair value; anomalies (search for similar items in EconPapers)
JEL-codes: G12 M41 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (14)

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