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Profit Persistence and Stock Returns

Gschwandtner, Adelina, Hauser, Michael (2016) Profit Persistence and Stock Returns. Applied Economics, 48 (37). pp. 3538-3549. ISSN 0003-6846. E-ISSN 1466-4283. (doi:10.1080/00036846.2016.1142652) (KAR id:60159)

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This paper attempts to assemble further empirical evidence on the relationship between the product and the financial market. Drawing back on work in industrial organization, we analyse the relationship between profit persistence and factor adjusted stock returns looking at about 2000 listed US firms over the last 34 years. While the relationship between (current, lagged and unexpected) profits/earnings and returns has been extensively analysed before, to our knowledge this is the first study to look at the relationship between stock returns and profit persistence. We interpret profit persistence as a result of market competition and innovation of the firm. It is shown that firm specific long-run profit persistence after correction for other additional economic fundamentals of the firm have a positive impact on 4-factor adjusted returns and a negative impact on their volatility.

Item Type: Article
DOI/Identification number: 10.1080/00036846.2016.1142652
Uncontrolled keywords: Profit Persistence; Competition; Stock Return; Heteroscedasticity; idiosyncratic risk
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HG Finance
Divisions: Divisions > Division of Human and Social Sciences > School of Economics
Depositing User: Adelina Gschwandtner
Date Deposited: 01 Feb 2017 14:14 UTC
Last Modified: 09 Dec 2022 05:15 UTC
Resource URI: (The current URI for this page, for reference purposes)

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Gschwandtner, Adelina.

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