This paper studies the effects of predictability on the earnings-returns relation for individual firms and for the aggregate. We demonstrate that prices better anticipate earnings growth at the aggregate level than at the firm level, which implies that random-walk models are inappropriate for...

In an efficient capital market, asset prices vary when investors change their expectations about cash flows, discount rates, or both. Using dividends to measure cash flows, previous research shows that the aggregate dividend-price ratio varies due to changes in expected discount rates (returns)...

This paper studies the effects of accounting fraud on the product market. The model presented in this paper relies on the idea that a firm's financial statements and actions must be consistent with each other. If the firm is behaving fraudulently, insofar as its financial statements portray it...

This paper studies the effects of accounting fraud on the product market. The model presented in this paper relies on the idea that a firm's financial statements and actions must be consistent with each other. If the firm is behaving fraudulently, insofar as its financial statements portray it...

While aggregate earnings should affect aggregate stock returns, standard portfolio theory predicts that the cross-sectional dispersion in firm-level earnings per se would not affect aggregate stock returns. Nonetheless, this paper documents that cross-sectional earnings dispersion is positively...