We develop a model based on the notion that prices lead earnings, allowing for a simultaneous estimation of the implied growth rate and the cost of equity capital for US industrial sectors. The major difference between our approach and that in prior literature is that ours avoids the necessity...

Existing empirical evidence suggests that residual income valuation models based on historical cost accounting considerably underestimate equity values. One possible explanation is the use of historical cost accounting under inflationary conditions. In this paper, we use a residual income...

In this paper, we establish a theoretical relationship between earnings components and future stock returns. It shows the informational role of earnings, cash flows and accruals in predicting future stock returns and the key role played by the earnings response coefficient. It also suggests that...

In this paper, we develop a framework for evaluating the impact of conservative accounting on the structure of residual income models of equity valuation. This affords a theoretical model of the signs and sizes of the valuation weights attached to book values, earnings and dividends as a...

Residual income models provide an important theoretical link between equity valuation and financial statement variables. While various researchers have developed models of how accounting policy impacts on the structure of these models, empirical support for these models is at best weak and...

In this paper we develop a general framework for evaluating the impact of conservative accounting on the structure of residual income models of equity valuation. This affords a theoretical understanding of the signs and sizes of the valuation weights observed in regression studies of the...

In this paper, we develop a framework for evaluating the impact of conservative accounting on the structure of residual income models of equity valuation. We explore specific examples of both unconditional and conditional conservatism and observe a common mathematical structure. We proceed to...