The Study Of Current Earnings Ability To Explain Expected Future Earnings In Relation To Stock Return
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Date
2003-04
Authors
HJ AHMAD, ABDUL JALIL
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Abstract
The ability of current earnings and other information that reflects expected future
earnings such as PIE ratio, B/P ratio and ROE will be the focus in explaining the
expected future earning in "ex-ante" study. The study indicates that current earnings
have the ability to explain expected future earnings if they are correlated with other
information such as combination of PIE, ROE and BIP. The study used secondary d~!a
from Kuala Lumpur Stock Exchange and it utilized the correlation and regression
. methodology. Components of earnings such as permanent earnings and temporary
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earnings can be important elements in determining the existence of earnings persistence.
The result showed an existence of correlation between current earnings changes and
expected earnings changes in "ex-ante" relationship and the ability of Low PIE and Low
ROE and Low PIE and High ROE groups in explaining expected future earnings and
earnings persistence in Malaysia equity market.
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Keywords
The Study Of Current Earnings Ability To Explain Expected Future , Earnings In Relation To Stock Return