We use earnings forecasts from a cross-sectional model to proxy for cash flow expectations and estimate the implied cost of capital (ICC) for a large sample of firms over 1968-2008. The earnings forecasts generated by the cross-sectional model are superior to analysts' forecasts in terms of...

We use the Campbell (1991) return decomposition framework to reexamine the variation in the information content of earnings between profit firms and loss firms and over time. We show that current earnings surprises are more strongly correlated with the discount rate news component of returns for...

Many studies report that the size effect in the cross-section of stock returns disappeared after the early 1980s. This paper shows that its disappearance can be attributed to negative shocks to the profitability of small firms and positive shocks to big firms. After adjusting for the price...