Discussion of “The Role of Expectations in Explaining the Cross-Section of Stock Returns”

Jing Liu ()
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Jing Liu: University of California at Los Angeles

Review of Accounting Studies, 2004, vol. 9, issue 2, No 3, 189-196

Abstract: Abstract This paper discusses Copeland et al. (2004), which empirically investigates the role of changes in expectations in explaining contemporaneous cross-sectional stock returns. Because the main results in this study are largely confirmatory of results reported in prior literature, my discussion emphasizes conceptual issues in the econometric specification of earnings–return relations. I derive three versions of return specifications from popular valuation models based on residual earnings, free cash flows, or earnings growth, and contrast them with that adopted by Copeland et al. (2004). This analysis suggests that firmer grounding in theory would help the paper in empirical specifications as well as interpretations of results.

Keywords: stock returns; accounting earnings; earnings expectations; valuations (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1023/B:RAST.0000028185.77089.ef

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