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Volatility and risk relevance of comprehensive income

Shahwali Khan and Michael E. Bradbury

Journal of Contemporary Accounting and Economics, 2014, vol. 10, issue 1, 76-85

Abstract: Motivated by concerns that the volatility of comprehensive income leads to the perception of increased risk we investigate the volatility and risk relevance of comprehensive income relative to net income for a sample of non-financial firms over the period 2005–2010. We find that comprehensive income is more volatile than net income and that comprehensive income is associated with market-based measures of risk (volatility of stock returns and beta). However, the volatility of comprehensive income incremental to net income is not associated with market risk and is not priced. These results have important implications for the FASB in deciding whether to report comprehensive income in a single statement of performance.

Keywords: Income volatility; Risk; Capital markets; Comprehensive income (search for similar items in EconPapers)
Date: 2014
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Journal of Contemporary Accounting and Economics is currently edited by Agnes C.S. Cheng, P. Clarkson, F.A. Gul, Zoltan Matolcsy, Dan Simunic and Ben Srinidhi

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