Adjusted Earnings Yields and Real Rates of Return

Posted: 8 Oct 2009

See all articles by Darshana Palkar

Darshana Palkar

affiliation not provided to SSRN

Stephen Wilcox

Minnesota State University, Mankato

Date Written: October 7, 2009

Abstract

An accurate forecast of real return requires that accounting and debt adjustments be made to reported earnings. This article presents methodologies that investors can use to estimate the accounting and debt adjustments for individual companies and offers evidence, derived from a predictive regression model, that investors should consider these adjustments important. The article also reviews the use of nonfinancial corporate debt and makes the case that investors should view the use of debt by nonfinancial companies more positively than they currently do.

Keywords: Debt Investments, Return or Yield Measures, Equity Investments, Fundamental Analysis and Valuation Models, Financial Statement Analysis, Accounting and Financial Reporting Issues, Quantitative Tools, Mathematical Methods

JEL Classification: M41, G32

Suggested Citation

Palkar, Darshana and Wilcox, Stephen, Adjusted Earnings Yields and Real Rates of Return (October 7, 2009). Financial Analysts Journal, Vol. 65, No. 5, 2009, Available at SSRN: https://ssrn.com/abstract=1484813

Darshana Palkar

affiliation not provided to SSRN ( email )

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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