A returns-based representation of earnings quality

Published

Journal Article (Review)

We examine the properties of a returns-based representation of earnings quality, estimated from firm-specific asset-pricing regressions augmented by an earnings quality mimicking factor. The coefficient on the earnings quality factor (the "e-loading") captures the sensitivity of the firm's returns to earnings quality in a given year or quarter, analogous to beta as a measure of the sensitivity of returns to market movements. Relative to other proxies for earnings quality, e-loadings can be calculated for larger samples of firms and can be estimated for shorter intervals at any point in time. Along all dimensions examined, we find that e-loadings perform well in capturing notions of earnings quality.

Full Text

Duke Authors

Cited Authors

  • Ecker, F; Francis, J; Kim, I; Olsson, PM; Schipper, K

Published Date

  • January 1, 2006

Published In

Volume / Issue

  • 81 / 4

Start / End Page

  • 749 - 780

International Standard Serial Number (ISSN)

  • 0001-4826

Digital Object Identifier (DOI)

  • 10.2308/accr.2006.81.4.749

Citation Source

  • Scopus