Forward Versus Trailing Earnings in Equity Valuation

Kenton K. Yee ()
Additional contact information
Kenton K. Yee: Columbia Business School

Review of Accounting Studies, 2004, vol. 9, issue 2, No 10, 329 pages

Abstract: Abstract This article articulates how forward earnings are more accurate valuation attributes than trailing earnings. First, I show that, while linear accrual rules cannot achieve accurate trailing earnings-value relations in a setting with unobserved information, they can achieve accurate forward earnings-value relations. Second, I prove that, even when accrual rules are restricted so that forward earnings fails to be an exact valuation attribute, more-forward earnings are more accurate valuation attributes than less-forward earnings or trailing earnings. In conclusion, even under deficient accrual policies, more-forward earnings are more accurate valuation attributes—the more-forward, the more accurate.

Keywords: accruals; beliefs; earnings; forecasts; valuation (search for similar items in EconPapers)
Date: 2004
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1023/B:RAST.0000028192.03130.df Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:reaccs:v:9:y:2004:i:2:d:10.1023_b:rast.0000028192.03130.df

Ordering information: This journal article can be ordered from
http://www.springer.com/accounting/journal/11142

DOI: 10.1023/B:RAST.0000028192.03130.df

Access Statistics for this article

Review of Accounting Studies is currently edited by Paul Fischer

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