The Effect of Earning Disaggregation on Prediction Ability of Stock Price for Listed Companies on Tehran Stock Exchange

This study has used the estimations of selected firm's equity values to determine the effect of earnings disaggregation in predicting their equity values. In this research three levels of earnings disaggregation; such as aggregate earnings, cash flows and total accruals, and cash flows and four major components of accruals was proposed. To test the research hypothesis, the comparison of means (medians) for prediction absolute error and prediction squared errors was used. The participants of this research which were selected based on some special characteristics, were 112 firms, accepted in stock exchange market of Tehran. The gathered data, after preparation and estimation were put through the Excel program and then its final analysis was done through SPSS program. Based on the obtained estimations in industry, some decreases in prediction errors while disaggregation of earnings to cash flows and total accruals were observed. When earnings were divided to cash flows and four major components of accruals, prediction errors were minimum.