The Permanent and Transitory Components of Corporate Earnings

This paper analyses a model in which earnings equal the sum of permanent and transitory components. The two components are estimated from the time series of total earnings using Kalman filtering methodology. The paper examines time-series data on annual earnings, share prices and dividends are estimates time-series data on annual earnings, share prices and dividends for a cross-section of British firms. The two components of earning are estimated, and then the permanent earnings component is applied to a model of dividend policy. 

Download is not available