The Adjusted Earnings Yield

Posted: 27 Sep 2007

See all articles by Stephen Wilcox

Stephen Wilcox

Minnesota State University, Mankato

Abstract

The earnings yield, determined by the ratio of reported earnings to price, is frequently used to predict real return. Complications characterize the predictions, however, because reported earnings are not real. This research identifies an adjusted earnings yield that ensures that real return can be determined as a ratio of current-period prices. From freely accessible and publicly disseminated data, an adjusted-earnings-yield series is created for the U.S. equity market. Statistical tests indicate that this measure is a much better predictor of future real returns than are other popular valuation measures.

Keywords: Equity Investments, Fundamental Analysis and Valuation Models, Financial Statement Analysis, Financial and Ratio Analysis

Suggested Citation

Wilcox, Stephen, The Adjusted Earnings Yield. Financial Analysts Journal, Vol. 63, No. 5, 2007, Available at SSRN: https://ssrn.com/abstract=1017326

Stephen Wilcox (Contact Author)

Minnesota State University, Mankato ( email )

228 Wiecking Center
Mankato, MN 56001
United States
(507) 389-6531 (Phone)

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