Work

Additional Evidence on the Incremental Information Content of Cash Flows and Accruals: The Impact of Errors in Measuring Market Expectations.

Year: 1998

Type: article

Abstract: This study evaluates the relation between security returns and funds-based earnings components. We document that proxies for market expectations of the components that are based on measures of historical serial- and cross-dependencies are substantially more accurate than random-walk proxies. Moreover, we detect significantly higher valuations of the operating cash flow component of earnings, relative to current accruals, when market expectations are represented using the dependency-based predictions. Such differential valuation is not detectable for random-walk representations. Contrary to results in Ali (1994), we find incremental information in unexpected cash flows over the whole spectrum (moderate and extreme) of unexpected cash flow realizations.

Source: The Accounting Review

DOI: 10.2308/tar-902587

Authors: Ray J. Pfeiffer, Pieter T. Elgers, May H. Lo, Lynn L. Rees

Institutions: Texas Christian University, University of Massachusetts Amherst, Western New England University, Utah State University, Texas A&M University

Language: English

Topic: Financial Markets and Investment Strategies

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2270266012

FWCI: 2.963

Cites: 11

Cited by: 62

Related to: 10