Earnings Quality and the Equity Risk Premium: A Benchmark Model

@inproceedings{Yee2006EarningsQA,
  title={Earnings Quality and the Equity Risk Premium: A Benchmark Model},
  author={Kenton K. Yee},
  year={2006}
}
  • Kenton K. Yee
  • Published 2006
  • Economics
  • This article solves a model that links earnings quality to the equity risk premium in an infinite-horizon consumption CAPM economy. In the model, risk-averse traders hold diversified portfolios consisting of a risk-free bond and shares of many risky firms. When constructing their portfolios, traders rely on noisy reported earnings and dividend payments for information about the risky firms. A new element of the model is an explicit representation of earnings quality based on reversing accrual… CONTINUE READING

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