Conditional pricing of earnings quality

Mingshan Zhang

Finance Research Letters, 2019, vol. 30, issue C, 306-313

Abstract: I reconsider the pricing effects of earnings quality in the context of conditional asset pricing models. A two-stage regression estimation procedure similar to the procedure described by Lettau and Ludvigson (2001) is employed. Given a conditional two-factor model consisting of the market portfolio and an earnings quality factor, I find evidence for the pricing of earnings quality risk. Earnings quality risk premium and conditional betas vary with economic states. My results stand in contrast to that of Core et al. (2008) whose specifications include an unconditional version of the same two factor model.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:30:y:2019:i:c:p:306-313

DOI: 10.1016/j.frl.2018.10.015

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