Quantitative Economics
Journal of the Econometric Society
Edited by: Bernard Salanié • Print ISSN: 1759-7323 • Online ISSN: 1759-7331
Quantitative Economics: Jul, 2025, Volume 16, Issue 3
Earnings Risk and Heterogeneous Expected Earnings Profiles
https://doi.org/10.3982/QE1663
p. 859-897
Scott Drewianka|Phillip Oberg
We add to the debate about whether models of earnings dynamics should allow for unobservable heterogeneity in expected earnings growth rates by examining implications for a statistic originally proposed to estimate the variance of persistent earnings shocks. While that statistic is unbiased under a common specification, we derive biases that would arise under alternative models and use them to draw inferences about their empirical relevance and to estimate key parameters. Most results cast doubt on substantial heterogeneity in growth rates, though some leave room for a modest role. Estimates of shocks' variance and persistence are more robust.
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Supplemental Material
Supplement to "Earnings Risk and Heterogeneous Expected Earnings Profiles"
Scott Drewianka and Phillip Oberg
The replication package for this paper is available at https://doi.org/10.5281/zenodo.14619045. The authors were granted an exemption to publish parts of their data because either access to these data is restricted or the authors do not have the right to republish them. Therefore, the replication package only includes the codes and the parts of the data that are not subject to the exemption. However, the authors provided the Journal with (or assisted the Journal to obtain) temporary access to the restricted data. The Journal checked the provided and restricted data and the codes for their ability to reproduce the results in the paper and approved online appendices.
