Investors and other contributors to stock exchange need a variety of tools, measures, and information in order to make decisions. One of the most common tools and criteria of decision makers is price-to earnings per share ratio. As a result, investors are in pursuit of ways to have a better assessment and forecast of price and dividends and get the highest returns on their investment. Previous ...

Investors hold portfolios of assets with different risk-reward profiles for diversification benefits. Conditional on the volatility of assets, diversification benefits can vary over time depending on the correlation structure among asset returns. The correlation of returns between assets has varied substantially over time. To insure against future “low diversification” states, investors might d...

We survey a theory of the economic underpinnings of the fat-tailed distributions of a number of financial variables, such as returns and trading volumes. Our theory posits that they have a common origin in the strategic trading behavior of very large financial institutions in a relatively illiquid market. We show how the fat-tailed distribution of fund sizes can indeed generate extreme returns ...

This paper applies the newly developed methodology of Bai and Ng (2002, 2003), providing the decomposition of large panel data into systematic and idiosyncratic components, to both returns and turnover. When combined with a GLS-based principal components approach, we demonstrate their procedure works well for both returns and turnover, despite the presence of severe heteroscedasticity and non-s...

Article history: Received 23 August 2011 Received in revised form 16 April 2012 Accepted 19 April 2012 Available online 5 May 2012 This paper proposes a two-state Markov-switching model for stock market returns in which the state-dependent expected returns, their variance and associated regime-switching dynamics are allowed to respond to market information. More specifically, we apply this mode...

Fama and French (1992) show that size and book-to-price dominate CAPM beta and other variables such as the price-earnings ratio and dividend yield in explaining the cross-section of US stock returns. Comparable evidence for the UK points to a book-to-price effect, but not a size effect (Chan and Chui, 1996; Strong and Xu, 1997). In this paper, our first contribution is to show that a measure of...

We investigate the ability of a tax-based fundamental—the ratio of tax-to-book income— to predict earnings growth and stock returns and to explain the earnings-price ratio. This tax fundamental reflects both temporary and permanent book-tax differences as well as tax accruals, such as changes in the tax valuation allowance. We find that the tax-to-book income ratio predicts subsequent five-year...

This paper addresses the incremental effects of two anomalous variables: pricescaled one-year-ahead analysts’ early-in-the-year earnings forecasts from Elgers, Lo, and Pfeiffer (2001) and price-scaled implicit firm values from Frankel and Lee (1998), where implicit firm values are defined in a manner consistent with the Ohlson (1995) residual income model. Because analysts’ forecasts are input ...

this paper examines the relationship between accounting conservatism and informational content of earnings using data of 167 firms listed on the tehran stock exchange during 2004-2013. accounting conservatism is measured based on khan and watts' (2009) model and feltham and ohlsson (1995) price model and easton and hariss (1991) return models were used to evaluate the informational content...