Aggregate accounting earnings can explain most of security returns. The case of long return intervals

Peter D. Easton, Trevor S. Harris, James Arvid Ohlson

Research output: Journal article publicationJournal articleAcademic researchpeer-review

233 Citations (Scopus)


The paper analyzes the contemporaneous association between market returns and earnings for long return intervals. The research design exploits two fundamental accounting attributes: (i) earnings aggregate over periods, and (ii) expanding the interval over which earnings are determined, is likely to reduce 'measurement errors' in (aggregate) earnings. These concepts lead to the level of (aggregate) earnings as a natural earnings variable for explaining security returns. We hypothesize that the longer the interval over which earnings are aggregated, the higher the cross-sectional correlation between earnings and returns. The empirical findings support this hypothesis.
Original languageEnglish
Pages (from-to)119-142
Number of pages24
JournalJournal of Accounting and Economics
Issue number2-3
Publication statusPublished - 1 Jan 1992
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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