Information in prices about future earnings

摘要: Abstract Stock return over a period reflects the market's revision in expectation of future earnings. Accounting earnings same period, however, have limited ability to reflect such revised expectations. Therefore, returns anticipate changes and response coefficient from regression on contemporaneous is biased toward zero. We reduce this bias by including leading-period price-earnings regressions. The resulting estimated magnitudes suggest that capital market, average, views be largely permanent. This consistent with random walk time series property annual