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Author Donelson, Dain C
Title Essays on fundamental analysis
book jacket
Descript 86 p
Note Source: Dissertation Abstracts International, Volume: 68-11, Section: A, page: 4760
Adviser: Theodore Sougiannis
Thesis (Ph.D.)--University of Illinois at Urbana-Champaign, 2007
This dissertation examines the usefulness of accounting and other information in the prediction of revenue, earnings and stock returns. In the first chapter, I find that quarterly revenue innovations display higher autocorrelation when quarters are from the same fiscal year ("differential persistence"). Differential persistence of revenue innovations is significantly higher for firms with larger absolute changes in the ratio of accounts receivable to revenue. Differential persistence of revenue innovations affects the differential persistence of earnings innovations. Finally, investors do not fully update earnings expectations for predictable persistence when earnings innovations are sorted based on revenue information and fiscal quarter. Over one quarter, post-earnings announcement drift is 10.44% for a high-persistence portfolio but statistically and economically insignificant for low-persistence portfolios
In the second chapter, I use a fundamental analysis strategy based upon common operating performance metrics to distinguish informative insider trades from noise trades. Insiders who trade consistently with these accounting fundamentals earn higher abnormal returns than the abnormal returns normally earned by insiders or those from the fundamental analysis strategy. A trading strategy based on the combination of publicly available insider trading and accounting data earns annual abnormal returns of approximately 15.1% after controlling for market, size, book-to-market and momentum factors. This trading strategy earns positive returns in each year of the study. These results are consistent with the selected set of insider trades being particularly informative with respect to mispricing
School code: 0090
Host Item Dissertation Abstracts International 68-11A
Subject Business Administration, Accounting
Alt Author University of Illinois at Urbana-Champaign
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