This paper confirms that US evidence of a negative relationship between earnings persistence and earnings volatility applies to UK firms over the period 1991–2010. Our analytical framework highlights the possibility that this result may reflect downward estimation bias in earnings persistence...

The fundamental valuation perspective on stock returns suggests that book-to-market will be positively related to returns if market value of equity equals future expected cash flows discounted at the expected return and book value proxies for future cash flows. Building on this perspective, we...