The paper presents an accounting framework for identifying characteristics that indicate expected returns. A model links expected returns to expected earnings and earnings growth, so a characteristic indicates expected returns if it indicates expected earnings and earnings growth that the market...

This paper investigates the question of whether so-called anomalous returns predicted by accounting numbers are normal returns for risk or abnormal returns. It does so via a model that shows how accounting numbers inform about normal returns if pricing were rational. The model equates expected...