Accounting Conservatism and Transitory Earnings in Value and Growth Strategies
Mattias Hamberg and
Jiri Novak ()
Journal of Business Finance & Accounting, 2010, vol. 37, issue 5‐6, 518-537
Abstract: The value premium earned on value and growth investment strategies increases after adjusting for transitory earnings and for the accounting conservatism bias in the book value of equity. Simple investment strategies based on earnings‐to‐price (E/P) and book‐to‐market (B/M) performed on the Swedish stock market between 1980 and 2004 generate an annual value premium of 11 to 14%. Adjustments for transitory earnings and for the conservatism bias increase the value premium by 2 to 4 percentage points, and at the same time they improve the consistency of earning it. These results suggest that transitory earnings and accounting conservatism introduce noise into E/P and B/M measures. Adjusting for these accounting characteristics makes the identification based on E/P and B/M more effective.
References: Add references at CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Journal Article: Accounting Conservatism and Transitory Earnings in Value and Growth Strategies (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:jbfnac:v:37:y:2010:i:5-6:p:518-537
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0306-686X
Access Statistics for this article
Journal of Business Finance & Accounting is currently edited by P. F. Pope, A. W. Stark and M. Walker
More articles in Journal of Business Finance & Accounting from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().