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Review of Quantitative Finance and Accounting

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01.11.2008 | Original Research

The persistence of earnings per share

verfasst von: Luis A. Gil-Alana, Rolando F. Peláez

Erschienen in: Review of Quantitative Finance and Accounting | Ausgabe 4/2008

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Abstract

The persistence of innovations to accounting earnings per share, EPS, has important implications for equity valuation, yet it remains a largely neglected subject. This paper employs various empirical tests in order to measure the persistence of shocks to EPS for the S&P 500 index. Within the I(0)/I(1) paradigm the empirical evidence rejects the I(1) specification, supporting instead a trend-stationary representation. When fractional orders of integration are considered, the results indicate that the detrended series is long memory (d > 0) and mean reverting (d < 1). The responses decay slowly to zero, albeit 50 quarters after an initial shock the responses remain significantly different from zero. Likewise, the variance ratio evidence suggests that the effect of a shock persists over time spans characteristic of the business cycle.

Vorheriger Artikel Specification analysis of corporate equity financing decision: a conditional residual approach

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Titel: The persistence of earnings per share
verfasst von: Luis A. Gil-Alana
Rolando F. Peláez
Publikationsdatum: 01.11.2008
Verlag: Springer US
Erschienen in: Review of Quantitative Finance and Accounting / Ausgabe 4/2008
Print ISSN: 0924-865X
Elektronische ISSN: 1573-7179
DOI: https://doi.org/10.1007/s11156-007-0077-0

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