The recent discourse surrounding the frequency of earnings reports has reignited a vital conversation among investors regarding the value of such information. As the current administration suggests a shift from quarterly to semi-annual reporting, a crucial question arises: does the cost of producing these reports outweigh the benefits they offer to stakeholders?
Drawing on long-term data compiled by Robert Shiller, this analysis explores the potential advantages of quarterly earnings reports for both long-term investors and those engaged in short-term trading.
While quantifying these benefits can be challenging, they must be assessed against potential savings that could result from less frequent disclosures.
Table of Contents:
The Case for Quarterly Reporting
In light of President Donald Trump’s recent proposal to modify the reporting framework, the implications for investors warrant thorough examination. The argument that reducing the frequency of earnings reports could relieve financial burdens on companies may hold some truth. However, one must consider whether such a change would lead to a detrimental loss of critical information for investors.
Understanding Earnings Trends
To evaluate this issue, I analyzed earnings data spanning from January 1970, when quarterly reporting became mandatory under the Securities and Exchange Commission, to June 2025. This timeframe allows for an assessment of the relationships among quarterly earnings, semi-annual earnings, and long-term earnings trends, defined as a 61-month centered moving average of earnings changes. My objective is to determine whether knowledge of quarterly earnings changes enhances an investor’s ability to predict shifts in long-term earnings trends.
Chart 1 illustrates these dynamics, presenting three-month earnings in green, six-month earnings in red, and trend earnings in blue. For clarity, the series is displayed starting from January 2000. While it is evident that quarterly earnings exhibit more volatility compared to semi-annual earnings, the visual representation does not immediately suggest that the additional insights from quarterly data significantly aid long-term investors in predicting earnings trends.
Insights for Short-Term Traders
Conversely, for short-term traders, the value of quarterly earnings reports becomes evident. These investors, typically focused on capturing earnings fluctuations within shorter time frames, can significantly benefit from access to quarterly earnings data. Empirical evidence supports this assertion, indicating that changes in quarterly earnings directly correlate with subsequent short-term earnings movements.
Analytical Models and Findings
For long-term investors seeking to gauge earnings trends, understanding the additional value that quarterly reports provide is essential. A practical approach involves modeling earnings trends based on changes in both quarterly and semi-annual earnings. In this analysis, I measured the fit of the models using R-squared values, with higher values indicating a better predictive capacity for earnings trends.
At any given time, investors possess knowledge of half of the current trend in earnings, specifically the first 30 months of data within the 61-month moving window. Depending on their access, they may know either the last three months of earnings, the last six months, or both. To assess whether quarterly earnings data enhances predictive accuracy, I constructed models to explore how changes in earnings forecasts are influenced by semi-annual and quarterly earnings.
The results, as shown in Table 1, demonstrate that incorporating quarterly earnings data into the model improves predictive accuracy, as indicated by an increase in adjusted R-squared from 0.098 to 0.126. Although neither fit is particularly strong, these findings suggest that quarterly earnings can indeed assist long-term investors in forecasting trend earnings more effectively.
Potential Challenges and Considerations
For short-term traders, the connection between quarterly earnings changes and subsequent earnings shifts is nearly self-evident. The data indicates that quarterly earnings changes are consistent and persistent, further underscored by the scatter plot in Chart 2, which reveals a positive correlation between changes in quarterly earnings over successive three-month periods.
Drawing on long-term data compiled by Robert Shiller, this analysis explores the potential advantages of quarterly earnings reports for both long-term investors and those engaged in short-term trading. While quantifying these benefits can be challenging, they must be assessed against potential savings that could result from less frequent disclosures.0
