Recent discussions at the White House have proposed a shift from quarterly to semi-annual earnings reporting for companies. This suggestion raises a pivotal question for investors: do the costs associated with frequent reporting exceed the potential benefits?
Utilizing robust data compiled by economist Robert Shiller, this article examines the significance of quarterly earnings reports. The analysis covers the period from January 1970 to June 2025, encompassing the time when the Securities and Exchange Commission mandated quarterly earnings disclosures. By exploring the relationship between three-month earnings changes and longer-term trends, we aim to assess the value offered by these reports.
Understanding quarterly versus semi-annual reporting
President Donald Trump has contended that transitioning to semi-annual earnings reporting could alleviate financial burdens for companies. While this may appear to be a prudent move for businesses, it raises a critical inquiry about the potential impact on investors. Specifically, would less frequent earnings reports deprive investors of essential information necessary for making informed decisions?
The data utilized in this analysis, sourced from Shiller’s online repository, enables a comprehensive exploration of earnings trends. By charting the fluctuations in three-month earnings alongside six-month earnings and a 61-month moving average trend, we can evaluate whether knowledge of three-month shifts provides additional insights for long-term investors.
The effect of quarterly earnings on long-term investment strategies
At first glance, three-month earnings reports may appear more volatile than their six-month counterparts. However, visual inspection alone does not yield a definitive answer regarding their utility in predicting long-term trends. Therefore, we employ statistical modeling to assess whether incorporating three-month changes enhances the accuracy of predicting future earnings trends. This analysis emphasizes measuring how well each model fits the data, using R-squared values as a benchmark.
For long-term investors focused on trend analysis, it is critical to evaluate how well the earnings data correlates with future expectations. By comparing models that include only six-month earnings changes to those that integrate three-month shifts, we aim to identify the added value of more frequent reporting.
The benefits for short-term traders
Although long-term investors may find quarterly reports somewhat beneficial in predicting trends, short-term traders stand to gain significantly from frequent earnings disclosures. The capacity to respond swiftly to changes in earnings is crucial for those seeking to capitalize on market fluctuations. Empirical evidence indicates that three-month earnings changes frequently correlate with subsequent changes in the same period, providing traders with actionable insights.
This analysis confirms that quarterly earnings changes exhibit significant persistent trends. For instance, the relationship between lagged three-month earnings changes and current figures has been quantified, demonstrating a strong correlation that underscores their importance for short-term trading strategies.
Exploring the implications of reduced reporting frequency
As regulators contemplate the feasibility of transitioning to semi-annual reporting, it is essential to consider not only the cost savings for companies but also the potential consequences for investors. Reducing the frequency of earnings disclosures could diminish market transparency and hinder efficient decision-making. Investors may find themselves navigating a less informed landscape, ultimately impairing market efficiency.
Moreover, past surveys conducted by the CFA Institute reveal a clear preference among members for maintaining quarterly earnings reporting. This sentiment highlights the significance of regular updates in fostering informed investment decisions across the board.
Utilizing robust data compiled by economist Robert Shiller, this article examines the significance of quarterly earnings reports. The analysis covers the period from January 1970 to June 2025, encompassing the time when the Securities and Exchange Commission mandated quarterly earnings disclosures. By exploring the relationship between three-month earnings changes and longer-term trends, we aim to assess the value offered by these reports.0