The ongoing discussion surrounding corporate earnings reporting has gained traction with recent proposals from the White House advocating for a shift from quarterly to semi-annual disclosures. This change raises critical questions for investors regarding the potential consequences of such a move. Notably, the primary concern is whether the benefits of frequent earnings updates outweigh the costs associated with their production.
Utilizing data compiled by renowned economist Robert Shiller, this article delves into the implications of quarterly earnings reports for both long-term investors and those with a shorter trading horizon.
By analyzing historical data, we can evaluate if the insights gleaned from quarterly reports provide a substantial advantage in understanding market trends and performance.
Table of Contents:
Analyzing the Value of Quarterly Earnings Reports
In a recent statement, President Donald Trump endorsed the notion that moving to semi-annual earnings reporting could alleviate some of the financial pressures faced by companies. While there is merit to this argument, it simultaneously raises an essential query: would this transition result in a detrimental loss of critical information for investors?
To explore this, I employed Shiller’s extensive earnings data, spanning from January 1970 until June 2025, coinciding with the implementation of mandatory quarterly earnings reporting by the Securities and Exchange Commission. The analysis aims to uncover relationships between earnings changes over three-month and six-month periods, alongside a longer-term earnings trend defined by a 61-month centered moving average.
Comparative Analysis of Earnings Trends
Charting the three-month earnings in green, six-month earnings in red, and the longer-term trend in blue, we can visualize how these data sets interact. Although three-month earnings display greater volatility compared to their six-month counterparts, it is not immediately evident whether the additional data from quarterly reports enhances a long-term investor’s ability to forecast trends effectively.
However, for short-term traders, the value of quarterly earnings is unmistakable. The data suggests that frequent updates allow these investors to react promptly to market fluctuations and capitalize on opportunities that arise within shorter timeframes. This insight necessitates a deeper look into how different investor types might benefit from these reporting frequencies.
Long-term Investors vs. Short-term Traders
For long-term investors, the focus shifts towards identifying and understanding overarching trends in earnings performance. By constructing a model to evaluate how changes in trend earnings may correlate with both three-month and six-month earnings, we can assess the accuracy of predictions based on these data inputs. The results highlight a notable increase in model fit when incorporating quarterly earnings data.
In the analysis, I compared two models: the first (Model 1) considered the changes in six-month earnings and prior trend changes, while the second (Model 2) included the additional variable of three-month earnings changes. The findings indicated a significant improvement in model fit, with the adjusted R-squared value rising from 0.098 to 0.126, suggesting that quarterly earnings data can indeed aid long-term investors in predicting earnings trends more accurately.
Short-term Trading Advantages
The benefits for short-term traders are even more pronounced. A clear relationship emerges between quarterly earnings changes and subsequent movements in earnings, highlighting the predictive power of frequent updates. Empirical evidence supports the notion that these changes are not only persistent but can also guide traders through the volatility of the market.
To emphasize this point, the analysis revealed that the model explaining twelve-month earnings with six-month earnings showed a robust R-squared of 0.699, which increased dramatically to 0.953 when three-month earnings data was included. This suggests that for short-term strategies, having access to quarterly updates is invaluable.
Conclusion: Weighing Pros and Cons
Utilizing data compiled by renowned economist Robert Shiller, this article delves into the implications of quarterly earnings reports for both long-term investors and those with a shorter trading horizon. By analyzing historical data, we can evaluate if the insights gleaned from quarterly reports provide a substantial advantage in understanding market trends and performance.0
Utilizing data compiled by renowned economist Robert Shiller, this article delves into the implications of quarterly earnings reports for both long-term investors and those with a shorter trading horizon. By analyzing historical data, we can evaluate if the insights gleaned from quarterly reports provide a substantial advantage in understanding market trends and performance.1
