Events

Prof. Rui Shen
Professor of Accounting
Assistant Dean (Research) | Director of Doctoral Studies
Shenzhen Finance Institute| School of Management and Economics
The Chinese University of Hong Kong, Shenzhen

We introduce a novel measure of Expected Earnings Smoothness (EES) derived from analyst forecasts. Compared to the traditional backward-looking smoothness measure, EES demonstrates superior predictive power for future earnings volatility. Firms with higher expected earnings volatility—after controlling for past cash flow volatility—generate economically significant excess returns of 59 basis points per month. Cross-sectional tests support a risk-based explanation: return predictability is stronger among firms with higher estimation and information risk, consistent with investors demanding compensation for bearing such risks. Our findings highlight the importance of expected (rather than realized) earnings smoothness in asset pricing and risk assessment.