This paper documents that the earnings yield and book-to-price combine to predict equity returns in a way that is consistent with the rational pricing of risk. It is well known that earnings yields predict returns in the cross-section, consistent with standard formulas that show that the...

Historical cost accounting deals with uncertainty by deferring the recognition of earnings until the uncertainty has largely been resolved. Such accounting affects both earnings and book value, and produces expected earnings growth deemed to be at risk. This paper shows that the...

This paper documents that the earnings yield and book-to-price combine to predict equity returns in a way that is consistent with the rational pricing of risk. It is well known that earnings yields predict returns in the cross-section, consistent with standard formulas that show that the...

Accounting is often criticized for omitting intangible assets from the balance sheet. With value in firms of today flowing less from tangibles assets and more from so-called intangibles – brands, distribution systems, supply chains, “knowledge capital,” “organization capital” –...