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SECURITY ANALYST FORECASTS AND THE EARNINGS YIELD ANOMALY
Author(s) -
Bauman W. Scott,
Dowen Richard J.
Publication year - 1994
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1994.tb00319.x
Subject(s) - earnings , earnings yield , anomaly (physics) , price–earnings ratio , yield (engineering) , econometrics , economics , stock (firearms) , earnings per share , order (exchange) , earnings response coefficient , financial economics , finance , mechanical engineering , physics , materials science , engineering , metallurgy , condensed matter physics
This paper tests for existence of a positive relationship between the earnings yield anomaly and the earnings forecast error (EFE) effect. The earnings yield anomaly recognizes that stocks with low price‐earnings ratios produce positive risk‐adjusted returns. The EFE effect refers to the positively related stock price response to differences in reported earnings per share (EPS) and the EPS previously forecast by security research analysts. The within group method is used in order to remove the effect of the EFE. Empirical research findings based on 1979‐1988 data, indicate that the EFE effect does not account for the earnings yield anomaly.