EarningsSurprise · Earnings growth · Foster, Olsen and Shevlin (1984)

Earnings Surprise

Long minus short quintile portfolio, value-weighted, market-adjusted. Quarterly, 1963Q3 to 2024Q4.

Expected return · posterior mean, % per quarter

Next quarter

0.56%

95% interval 0.11% to 1.02%

Next year

0.56%

95% interval 0.10% to 1.02%

Next five years

0.55%

95% interval 0.07% to 1.04%

Next quarter

1.36%

95% interval 1.06% to 1.68%

Next year

1.35%

95% interval 0.99% to 1.73%

Next five years

1.32%

95% interval 0.76% to 1.87%

Next quarter

0.77%

95% interval 0.22% to 1.29%

Next year

0.73%

95% interval 0.17% to 1.29%

Next five years

0.61%

95% interval −0.07% to 1.28%

Next quarter

1.49%

95% interval 1.13% to 1.85%

Next year

1.48%

95% interval 1.04% to 1.91%

Next five years

1.45%

95% interval 0.77% to 2.09%

Cumulative market-adjusted return

+281% since 1963Q3 · log scale

Window	Mean	Vol.	Sharpe	t
1963Q3–2024Q4	2.48%	7.76%	0.32	2.50
2020Q1–2024Q4	3.93%	11.87%	0.33	0.74
2024Q1–2024Q4	9.45%	9.67%	0.98	0.98
1963Q3–2024Q4	7.50%	5.81%	1.29	10.11
2020Q1–2024Q4	5.94%	7.21%	0.82	1.84
2024Q1–2024Q4	10.01%	9.50%	1.05	1.05
1963Q3–2024Q4	2.63%	8.96%	0.29	2.30
2020Q1–2024Q4	4.50%	12.43%	0.36	0.81
2024Q1–2024Q4	16.95%	20.95%	0.81	0.81
1963Q3–2024Q4	8.61%	7.42%	1.16	9.10
2020Q1–2024Q4	5.61%	9.26%	0.61	1.35
2024Q1–2024Q4	14.34%	12.12%	1.18	1.18

Horizon	Mean	95% interval	P(neg)
Next quarter	0.144	0.028 – 0.262	0.01
Next year	0.144	0.026 – 0.264	0.01
Next five years	0.143	0.018 – 0.268	0.01
Next quarter	0.478	0.372 – 0.587	0.00
Next year	0.471	0.343 – 0.599	0.00
Next five years	0.455	0.261 – 0.646	0.00
Next quarter	0.173	0.049 – 0.292	0.00
Next year	0.164	0.038 – 0.289	0.01
Next five years	0.137	−0.015 – 0.286	0.04
Next quarter	0.411	0.313 – 0.512	0.00
Next year	0.404	0.286 – 0.524	0.00
Next five years	0.390	0.207 – 0.562	0.00