With the White Dwelling downplaying the price of quarterly reporting for corporations, patrons face a well-recognized question: does the value of manufacturing information outweigh the benefits?
Using Robert Shiller’s long-run info, this submit displays that quarterly earnings embrace information that’s likely helpful to every long-term allocators and short-term retailers. Its benefits, which I don’t attempt to quantify, must be weighed in opposition to any monetary financial savings from less-frequent reporting.
Quarterly vs. Semi-Annual: What’s at Stake
The White Dwelling this week generally known as for a change from quarterly to semi-annual earnings reporting. President Donald Trump argued that such a shift would save corporations time and money.
That could possibly be true. Nonetheless would patrons lose helpful information?
To answer this question, I benefit from earnings info from Robert Shiller’s on-line info from January 1970 (1970:1), the 12 months via which the Securities and Alternate Charge made quarterly earnings compulsory, to 2025:6 to examine relationships among the many many change in three-month earnings, six-month earnings, and the event in earnings. I define the event as a 61-month centered transferring widespread change in earnings. Notably, I check out whether or not or not understanding three-month earnings’ changes helps an investor larger estimate changes inside the longer-term growth in earnings.
Chart 1 displays three-month earnings in inexperienced, six-month earnings in pink, and growth earnings in blue. Assortment start in January 2000 (2000:1), reasonably than 1970:1, for ease of visualization.
Chart 1. 3-month, 6-month, and growth earnings, 2000:1 to 2025:6.
Provide: Robert Shiller on-line info, author calculations.
In reality, three-month earnings are choppier than six-month earnings. Nonetheless it’s not obvious from seen inspection that understanding three-month earnings together with six-month earnings would help a long-term investor predict changes in growth earnings. (I check out this beneath and uncover that they could).
It’s, nonetheless, obvious {{that a}} short-term investor, one perhaps interested by earnings changes in durations of decrease than a 12 months, would revenue from understanding three-month earnings. This comment is confirmed empirically beneath.
I start with the long-term investor, who I assume is inside the long-term growth in earnings. A pure technique to gauge the price of getting three-month earnings together with (or as a substitute of) six-month earnings is to model the change in growth earnings as a function of 1 or every, estimate that model using peculiar least squares, and look at model accuracy. On this submit, I benefit from R-squared as my measure of match (or adjusted R-squared) — the larger, the upper.
At any stage, the investor is conscious of one-half the current growth in earnings. That’s, they know the first 30 months’ earnings of the current 61-month window, my proxy for the event in earnings. And they also know each the ultimate three months of earnings, or the ultimate six months of earnings, or every.
To search out out whether or not or not receiving earnings information every three months versus every six months would help the long-term investor to larger predict the event, I estimated specs the place the change in 30-month-ahead growth inflation is outlined by the change in six-month earnings alone plus the prior earnings-trend change (Model 1). In Model 2, the event change is outlined by the equivalent variables plus the three-month change in earnings. Outcomes are confirmed in Desk 1.
Desk 1. Regressions of growth inflation change on 3- and 6-month earnings changes, 1970:1 – 2025:6.
Dependent variable = Sample inflation (30-month lead) | ||
Model 1 | Model 2 | |
Six-mo. change (three-mo. lag) | 0.073 (0.013) | 0.061 (0.013) |
Three-mo. change | – | 0.124 (0.029) |
Sample change | -0.223 (0.041) | -0.234 (.040) |
Adjusted R-squared | 0.098 | 0.126 |
Obs | 547 | 547 |
Provide: Robert Shiller on-line info, author calculations.
Since I’m not interested by inference, I omit dialogue of estimated coefficient values, except for to note that they enter with the anticipated sign. Nonetheless this, I embody the prior growth in earnings to chop again bias in my estimates and customary errors appear in parenthesis subsequent to each estimate.
The necessary factor outcome’s that together with quarterly earnings (three-month change) improves match — the adjusted R-squared will enhance from 0.098 for Model 1 to 0.126 for Model 2. Whereas neither match is spectacular, these outcomes counsel that quarterly earnings may help the long-term investor predict growth earnings. Completely different measures of match, significantly the Akaike and Bayesian information requirements (AIC and BIC), confirm that the specification which contains 3-month earnings is further right.
As for what may be of curiosity to retailers (short-term patrons), one might guess that the three-month earnings change is claimed to the following three-month change. Quarterly earnings changes are definitely persistent. The scatter in Chart 2 displays the autocorrelation of quarterly earnings, the place extreme values (earnings changes bigger than 100%) have been eradicated for less complicated viewing. The estimated slope is 0.601 (se = 0.031) — the blue best match line is flatter than the black 45-degree diagonal line — and the R-squared is 0.361.
Chart 2. Three-month lagged earnings change vs. three-month earnings change, 1970:1 – 2025:6.

Provide: Robert Shiller on-line info, author calculations.
And on the specter of estimating the plain, the R-squared of a model explaining 12-month earnings with six-month earnings (from six-months sooner than) is 0.699, whereas along with three-month earnings (from three-months sooner than) improves the match to 0.953.
Value vs. Revenue
It’s virtually axiomatic that, in most features, further info is preferable to a lot much less. And the outcomes talked about proper right here counsel that quarterly earnings embrace helpful information for patrons. Nonetheless producing earnings is pricey.
As regulators ponder reducing reporting frequency, they should weigh not merely the monetary financial savings however moreover the potential losses — losses to patrons ensuing from a lot much less transparency and to the monetary system ensuing from impaired market effectivity.
Additional to Suppose About
Earlier CFA Institute member surveys current clear assist for quarterly earnings.