Share valuation : resolving the negative earnings
puzzle

Fox, RP; Huruva, F

Abstract

This paper presents a resolution of the apparently illogical observation in a number of papers that higher losses are associated with higher share valuations. We create conditional distributions from a sample of 42,857 firm years on the London Stock Exchange and show that the relationship is illusory. We argue that our model is better aligned with the concept of market efficiency and the problem of differentiating between observations and expectations. More generally, the model developed here can be applied to all studies that seek to explain market prices.

Citation

puzzle. Presented at British Accounting and Finance Conference 2015, Manchester

• Presentation Conference Type: Other
• Conference Name: British Accounting and Finance Conference 2015
• Conference Location: Manchester
• Start Date: Mar 23, 2015
• End Date: Mar 25, 2015
• Deposit Date: May 29, 2015
• Publicly Available Date: May 29, 2015
• Publisher URL: http://www.bafa.ac.uk/events/events-past/past-event-of-bafa-annual-conference.html
• Additional Information: Event Type : Conference