The ongoing discussion regarding the frequency of earnings reporting has gained renewed attention, particularly following recent comments from the White House advocating a shift from quarterly to semi-annual updates. This proposal raises an essential question for investors: does the information derived from quarterly reports justify the associated costs of their preparation?
This article will analyze data provided by economist Robert Shiller to assess whether insights from quarterly earnings reports hold value for both long-term and short-term investors.
The analysis will weigh the potential advantages of frequent reporting against the financial relief that could arise from less frequent updates.
Table of Contents:
The Rationale Behind Quarterly Earnings
Mandatory since 1970, quarterly earnings data was introduced by the Securities and Exchange Commission to enhance transparency and provide timely information to stakeholders. However, the White House has recently suggested that moving to semi-annual reports could alleviate some burdens faced by companies, potentially saving them time and resources.
While this claim has merit, it prompts a critical inquiry: would investors sacrifice essential information by reducing the frequency of earnings reports? To investigate this, we will analyze long-term trends in earnings changes and their significance for investors.
Understanding Earnings Trends
Utilizing Shiller’s comprehensive dataset, we can examine the relationship between three-month and six-month earnings. This analysis spans from January 1970 to June 2025, enabling us to observe patterns in earnings changes over time. The trend is defined using a centered moving average of 61 months, which provides a clear view of long-term earnings trajectories.
Visual representations of these trends reveal that while three-month earnings can fluctuate more dramatically than their six-month counterparts, these short-term figures may still offer valuable insights into future performance. The challenge lies in determining whether this additional data enhances the ability of long-term investors to forecast trends.
Short-Term Versus Long-Term Perspectives
For short-term investors, understanding the nuances of three-month earnings changes can be particularly beneficial. The volatility inherent in these reports may provide crucial insights during periods of economic uncertainty. In contrast, long-term investors typically focus on overall trends rather than short-term fluctuations.
To assess the value of incorporating three-month earnings data into investment strategies, we can employ statistical models to measure the effectiveness of forecasting earnings trends. By comparing models that utilize either three-month or six-month earnings data, we can determine which approach yields more accurate predictions.
Statistical Evaluation of Earnings Data
This analysis establishes two models. The first (Model 1) considers only the six-month earnings change, while the second (Model 2) includes both three-month earnings changes and the prior trend in earnings. By examining the adjusted R-squared values from these models, we can gauge their predictive accuracy.
The results indicate a notable improvement in model fit when incorporating three-month earnings data. Specifically, the adjusted R-squared increases from 0.098 in Model 1 to 0.126 in Model 2, suggesting that quarterly earnings reporting can enhance long-term investors’ forecasts of trend earnings. Although neither model exhibits strong predictive power, the addition of quarterly data appears to provide a modest yet meaningful advantage.
Implications for Investors
This article will analyze data provided by economist Robert Shiller to assess whether insights from quarterly earnings reports hold value for both long-term and short-term investors. The analysis will weigh the potential advantages of frequent reporting against the financial relief that could arise from less frequent updates.0
This article will analyze data provided by economist Robert Shiller to assess whether insights from quarterly earnings reports hold value for both long-term and short-term investors. The analysis will weigh the potential advantages of frequent reporting against the financial relief that could arise from less frequent updates.1
This article will analyze data provided by economist Robert Shiller to assess whether insights from quarterly earnings reports hold value for both long-term and short-term investors. The analysis will weigh the potential advantages of frequent reporting against the financial relief that could arise from less frequent updates.2
