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Measuring the impact of sales on earnings and equity price.

Authors :
Kim, Oliver
Lim, Steve
Park, Taewoo
Source :
Review of Quantitative Finance & Accounting; Feb2009, Vol. 32 Issue 2, p145-168, 24p, 9 Charts
Publication Year :
2009

Abstract

In this paper we examine how sales affect earnings and in turn the stock price using a model in which sales contribute to earnings by a fixed sales margin rate and the stock price responds more sensitively to sales-induced earnings than to non-sales-induced earnings. We report that the regression coefficient of the sales margin (2.54) is about three times the earnings response coefficient (0.85) for the full sample and can be as high as 19 times the earnings response coefficient for an industry (i.e., 11.95 vs. 0.62 for restaurants). We contribute to the literature by identifying and documenting factors that make separating out the sources of earnings more important in equity pricing. [ABSTRACT FROM AUTHOR]

Details

Language :
English
ISSN :
0924865X
Volume :
32
Issue :
2
Database :
Complementary Index
Journal :
Review of Quantitative Finance & Accounting
Publication Type :
Academic Journal
Accession number :
36937014
Full Text :
https://doi.org/10.1007/s11156-008-0086-7