 Earnings betaReview of Accounting Studies, 2021, vol. 26, issue 1, No 3, 122 pages Abstract: Abstract The literature on cash flow or earnings beta is theoretically well-motivated in its use of fundamentals, instead of returns, to measure systematic risk. However, empirical measures of earnings beta based on either log-linearizing the return equation or log-linearizing the clean-surplus accounting identity are often difficult to construct. I construct simple earnings betas based on various measures of realized and expected earnings and find that an earnings beta based on price-scaled expectations shocks performs consistently well in explaining the cross-section of returns over 1981–2017. I also examine the relation between different measures of beta and several firm characteristics that are either theoretically connected to systematic risk or are empirically associated with returns and find evidence in support of the construct validity of an earnings beta based on price-scaled expectations shocks. Overall, the findings suggest that this easy-to-construct earnings beta can be suitable for future researchers requiring a measure of systematic risk. Keywords: Cash flow beta; Earnings beta; Systematic risk; Expected returns; Aggregate earnings; G10; G12; M41 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:spr:reaccs:v:26:y:2021:i:1:d:10.1007_s11142-020-09561-w Ordering information: This journal article can be ordered from DOI: 10.1007/s11142-020-09561-w Access Statistics for this article Review of Accounting Studies is currently edited by Paul Fischer More articles in Review of Accounting Studies from Springer |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.