Prior studies show that investor learning about earnings-based return predictors from academic research erodes return predictability. However, the signaling power of “bottom-line” earnings has declined over time, which complicates assessments of investor learning about profitability signals...

Financial distress has a dual effect on stock pricing: it affects both investors’ expected return and stock pricing efficiency. Therefore, the estimated relation between it and realized return captures both the relation between it and expected return and the relation between it and the...