Review of Quantitative Finance and Accounting

, Volume 31, Issue 4, pp 425–439

The persistence of earnings per share

Original Research

DOI: 10.1007/s11156-007-0077-0

Cite this article as:
Gil-Alana, L.A. & Peláez, R.F. Rev Quant Finan Acc (2008) 31: 425. doi:10.1007/s11156-007-0077-0


The persistence of innovations to accounting earnings per share, EPS, has important implications for equity valuation, yet it remains a largely neglected subject. This paper employs various empirical tests in order to measure the persistence of shocks to EPS for the S&P 500 index. Within the I(0)/I(1) paradigm the empirical evidence rejects the I(1) specification, supporting instead a trend-stationary representation. When fractional orders of integration are considered, the results indicate that the detrended series is long memory (d  >  0) and mean reverting (d < 1). The responses decay slowly to zero, albeit 50 quarters after an initial shock the responses remain significantly different from zero. Likewise, the variance ratio evidence suggests that the effect of a shock persists over time spans characteristic of the business cycle.


PersistenceFractional integrationEarnings per share

JEL Classifications


Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of Navarra, PamplonaPamplonaSpain
  2. 2.Finance Department, College of BusinessUniversity of Houston-DowntownHoustonUSA