We extend Easton's (2007) review of the literature on accounting-based estimates of the expected rate of return on equity capital, which we refer to as the ERR. We begin by reiterating the reasons why accounting-based estimates are used. Next, we briefly review the recent literature that focuses...

Recent literature has used analysts' earnings forecasts, which are known to be optimistic, to estimate implied expected rates of return; yielding upwardly biased estimates. We estimate that the bias, computed as the difference between the estimates of the implied expected rate of return based on...

On average, across the years 1980 to 2018, almost 8.5 percent of firms on the Compustat Annual data set, which had earnings observations in year t-1, did not have earnings observations in year t. Because these disappearances were not random, there is attrition bias in estimates of earnings...