Abstract
Recently, Watts [1975], Foster [1977], and Griffin [1977] have suggested that a single Box and Jenkins (BJ) [1970] model form explains the time series of most firms' quarterly accounting earnings per share. In BJ notation, Watts and Griffin propose the (0,1,1) x (0,1,1) model, while Foster favors the (1,0,0) x (0,1,0) model with constant. We propose here a third model, the (1,0,0) x (0,1,1) model. We test several single model forms and individually identified BJ models. After reviewing previous studies (Section 1.1), we present past evidence pointing to the (1,0,0) x (0,1,1) model (1.2) and discuss individual BJ model identification (1.3). Section 2 of the paper contains sample description (2.1), fitting tests (2.2), and tests of model forecasts over several horizons and holdout periods (2.3). Conclusions and a summary appear in Section 2.4.
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