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BUSINESS AND ECONOMICS RESEARCH JOURNAL

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Article Information

Journal: Business and Economics Research Journal

Title of Article: Time-series Properties of Earnings and Their Relationship with Stock Prices in Brazil

Author(s): Rene Coppe Pimentel, Iran Siqueira Lima

Volume: 1

Number: 4

Year: 1

Page: 43 – 65

ISSN: 1309-2448

Abstract

The aim of this paper is to analyze the firm-specific time-series properties of quarterly accounting earnings from 1995 to 2009. Based on the earning time-series process it is possible to develop robust forecasting models and to test the ability to approximate real capital market behaviour using accounting data. By analysing 71 listed Brazilian companies, we found evidence that the time series of quarterly accounting earnings in Brazil follow an autoregressive model (AR) and can be estimated (modelled) by using a seasonal component. Additionally, we found a significant relationship between earnings and stock prices, although the direction of the causality is not generally defined, which suggests that the earnings-return relationship must be analyzed at the firm-specific level.

Keywords: Emerging markets, Time series, Accounting earnings, Capital market, Valuation

JEL Classification: M41, G30

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