On the relevance of earnings components: valuation and forecasting links

Accounting and Finance

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On the relevance of earnings components: valuation and forecasting links. / Wang, P; Pope, P F.
Lancaster University: The Department of Accounting and Finance, 2000. (Accounting and Finance Working Paper Series).

Research output: Working paper

Harvard

Wang, P & Pope, PF 2000 'On the relevance of earnings components: valuation and forecasting links' Accounting and Finance Working Paper Series, The Department of Accounting and Finance, Lancaster University.

APA

Wang, P., & Pope, P. F. (2000). On the relevance of earnings components: valuation and forecasting links. (Accounting and Finance Working Paper Series). The Department of Accounting and Finance.

Vancouver

Wang P, Pope PF. On the relevance of earnings components: valuation and forecasting links. Lancaster University: The Department of Accounting and Finance. 2000. (Accounting and Finance Working Paper Series).

Author

Wang, P ; Pope, P F. / On the relevance of earnings components: valuation and forecasting links. Lancaster University : The Department of Accounting and Finance, 2000. (Accounting and Finance Working Paper Series).

Bibtex

@techreport{0e561335f0d44f108cd07c2d4c6cd375,

title = "On the relevance of earnings components: valuation and forecasting links",

abstract = "In this paper we analyze the links between the informational relevance of earnings components for valuation and for forecasting abnormal earnings. We show that forecasting irrelevance implies valuation irrelevance. However, except in the case where aggregate earnings is the sufficient earnings construct for valuation and forecasting, valuation irrelevance does not imply forecasting irrelevance. Additionally, we show that to be irrelevant for valuation and forecasting, an earnings component need not be unpredictable. Our analysis has implications for the design and interpretation of empirical tests of informational relevance. It also has potential implications for practical investment analysis. Generally, value estimates based on aggregate earnings are expected to be less precise than value estimates based on knowledge of earnings components and their relation to other accounting items.",

author = "P Wang and Pope, {P F}",

year = "2000",

language = "English",

series = "Accounting and Finance Working Paper Series",

publisher = "The Department of Accounting and Finance",

type = "WorkingPaper",

institution = "The Department of Accounting and Finance",

}

RIS

TY - UNPB

T1 - On the relevance of earnings components: valuation and forecasting links

AU - Wang, P

AU - Pope, P F

PY - 2000

Y1 - 2000

N2 - In this paper we analyze the links between the informational relevance of earnings components for valuation and for forecasting abnormal earnings. We show that forecasting irrelevance implies valuation irrelevance. However, except in the case where aggregate earnings is the sufficient earnings construct for valuation and forecasting, valuation irrelevance does not imply forecasting irrelevance. Additionally, we show that to be irrelevant for valuation and forecasting, an earnings component need not be unpredictable. Our analysis has implications for the design and interpretation of empirical tests of informational relevance. It also has potential implications for practical investment analysis. Generally, value estimates based on aggregate earnings are expected to be less precise than value estimates based on knowledge of earnings components and their relation to other accounting items.

AB - In this paper we analyze the links between the informational relevance of earnings components for valuation and for forecasting abnormal earnings. We show that forecasting irrelevance implies valuation irrelevance. However, except in the case where aggregate earnings is the sufficient earnings construct for valuation and forecasting, valuation irrelevance does not imply forecasting irrelevance. Additionally, we show that to be irrelevant for valuation and forecasting, an earnings component need not be unpredictable. Our analysis has implications for the design and interpretation of empirical tests of informational relevance. It also has potential implications for practical investment analysis. Generally, value estimates based on aggregate earnings are expected to be less precise than value estimates based on knowledge of earnings components and their relation to other accounting items.

M3 - Working paper

T3 - Accounting and Finance Working Paper Series

BT - On the relevance of earnings components: valuation and forecasting links

PB - The Department of Accounting and Finance

CY - Lancaster University

ER -

Research

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