earticle

영어

This study evaluates the relation among security returns and funds-based earnings components by incorporating the predictive information in historical serial- and cross- correlations among the earnings components. We document that proxies for market expectations of the components that are based on measures of serial- and cross-dependencies are more accurate than random-walk proxies. We find that operating cash flow component of earnings is significantly more highly valued than current accruals when the serial dependency model is used as an expectation model of the components. Particularly, this additional information content of operating cash flows over current accruals is driven by firm-years having extreme unexpected operating cash flows.