|
In financial economics and accounting, the earnings response coefficient, or ERC, is the estimated relationship between equity returns and the unexpected portion of (i.e., new information in) companies' earnings announcements. Arbitrage pricing theory describes the theoretical relationship between information that is known to market participants about a particular equity (e.g., a common stock share of a particular company) and the price of that equity. Under the efficient market hypothesis, equity prices are expected in the aggregate to reflect all relevant information at a given time. Market participants with superior information are expected to exploit that information until share prices have effectively impounded the information. Therefore, in the aggregate, a portion of changes in a company's share price is expected to result from changes in the relevant information available to the market. The ERC is an estimate of the change in a company's stock price due to the information provided in a company's earnings announcement. The ERC is expressed mathematically as follows: :UR = the unexpected return :a = benchmark rate :b = earning response coefficient :(ern-u) = (actual earnings less expected earnings) = unexpected earnings :e = random movement Good News (GN) firms enjoyed positive abnormal returns, and negative for their Bad News (BN) firms. This raises the question of why the market might respond more strongly to the good or bad news in earnings for some firms than for others. If the answer can be found, accountants can improve their understanding of how accounting information is useful to investors. This, in turn, could lead to the preparation of more useful financial statements. Consequently, one of the most important directions that empirical financial accounting research took since the BB study (Ball and Brown (1968)) is the identification and explanation of differential market response to earnings information. This is called earnings response coefficient (ERC). "Earnings response coefficient measures the extent of security’s abnormal market return in response to the unexpected component of reported earnings." '' ==Reasons== Reasons for differential market response: #''BETA'': The more risk related to the firm's expected returns the lower will be the investor's reactions to a given amount of unexpected earnings.(Note: beta shows risk of a security so you can assume that a high beta means a high risk). #''CAPITAL'' STRUCTURE: ERC for a highly leveraged firm is lower than for a firm with little or no debt, Any good news passed on means that the debt holders get this benefit instead of the investors. (Thus it is important to disclose the nature & magnitude of financial instruments including off-balance sheet). #''PERSISTENCE'': Source of increase in current earnings affects the ERC: If earnings are expected to persist into the future this will result in a higher ERC. If the component in the earnings is non-persistent (i.e. unusual, non recurring items) this will result in lower ERC. 抄文引用元・出典: フリー百科事典『 ウィキペディア（Wikipedia）』 ■ウィキペディアで「Earnings response coefficient」の詳細全文を読む スポンサード リンク
|