Use of Fuller's Technique to Reduce Measurement Error in the Returns/Earnings Association

Susan M Machuga

Review of Quantitative Finance and Accounting, 2000, vol. 14, issue 3, 219-45

Abstract: Empirical estimates of the earnings response coefficient have consistently been lower than theory predicts. This may be because empirical proxies for unexpected earnings contain measurement error. I demonstrate and evaluate the use of a recently developed technique by Fuller that yields consistent parameter estimates in the presence of measurement error. The empirical results indicate that this technique is successful at mitigating measurement error bias in the earnings response coefficient. The earnings response coefficient increases by as much as 52 percent. In contrast, replication of the techniques performed in previous studies increases the earnings response coefficient by only 8 percent. Copyright 2000 by Kluwer Academic Publishers

Date: 2000
References: Add references at CitEc
Citations:

Downloads: (external link)
http://journals.kluweronline.com/issn/0924-865X/contents link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:rqfnac:v:14:y:2000:i:3:p:219-45

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/11156/PS2

Access Statistics for this article

Review of Quantitative Finance and Accounting is currently edited by Cheng-Few Lee

More articles in Review of Quantitative Finance and Accounting from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().