We examine whether financial analysts understand the valuation implications of unconditional accounting conservatism when forecasting target prices. While accounting conservatism affects reported earnings, conservatism per se does not have an effect on the present value of future cash flows. We...

Limited attention theory predicts that higher salience of earnings news implies a stronger immediate market reaction to earnings news and a weaker post-earnings announcement drift (PEAD) or reversal (PEAR). Using a new measure, SALIENCE, defined as the number of quantitative items in an earnings...

We investigate whether industry tax planning affects a firm's cost of capital by increasing its exposure to tax policy risk. We find evidence that equity returns increase with the propensity for tax planning in a firm's industry. Consistent with a policy risk interpretation, the magnitude of the...

We examine the role of January in the relation between expected losses/profits and future stock returns. We predict and find that the relation between expected losses/profits and future returns reverses from the usual positive relation in non-January months to a negative one in January. The...

Bradshaw and Sloan (2002) document a significant increase in the difference between the earnings response coefficients (ERCs) for GAAP and Street (I/B/E/S) earnings over the 1990s, suggesting that the market has become increasingly reliant or fixated on Street earnings. In this study we...

We use returns of actively managed mutual funds to document the link between accrual quality (AQ) and systematic (priced) risk. Despite compelling theoretical arguments, prior research finds no evidence that poor AQ commands a risk premium in the cross-section of realized stock returns. We argue...

Human capital is a key factor in value creation in the modern corporation. Yet the disclosure of investment in human capital is scant. We propose that a company's online job postings are disclosures made outside of the investor relations channel that contain forward-looking information that...

We examine the macroeconomic information content of aggregate earnings from the labor market's perspective. We use insights from the labor economics literature to characterize the information contained in aggregate GAAP earnings and its components that is relevant for predicting aggregate job...

This paper reveals that in addition to fundamental factors, the 52-week high price and recent investor sentiment play an important role in analysts' target price formation. Analysts' forecasts of short-term earnings and long-term earnings growth are shown to be important explanatory variables...

We propose a methodology to incorporate risk measures based on economic fundamentals directly in the valuation model. Fundamentals-based risk adjustment in the residual income valuation model is captured by the covariance of excess ROE with market-wide factors. We simplify the covariance risk...