The tendency of earnings estimates to fall

Michael Perelman michael at ecst.csuchico.edu
Wed Apr 4 14:39:38 PDT 2001


Doug, I don't understand the answer they gave you. Are they saying that if I was given stock options five years ago, move onto another company the next year, and then cash them in today that the timing does not matter because somehow all of his averages out. It doesn't sound very convincing to me.

Certainly for the individual the timing of cashing out the stock option and the work done with not coincide. Lumpiness does not seem to be a major issue.

Doug Henwood wrote:


> michael at ecst.csuchico.edu wrote:
>
> >Isn't there a problem with that way of accounting since the compensation
> >and production come in different periods, perhaps years apart?
>
> Ok, just spoke with a guy at the Bureau of Economic Analysis, who
> said: 1) proceeds of exercised options are included in wage & salary
> income - they don't know how much, since it just blends in with the
> rest; 2) the timing problem probably isn't important, since the
> exercises are more or less continuous rather than "lumpy; and 3) the
> option problem probably has little to do with the large statistical
> discrepancy of the last few years. The stat discrepancy is the
> difference between income & product, which conceptually are supposed
> to be equal, since income is earned in production, but aren't in
> practice, since the numbers are estimated separately; product data is
> considered more reliable than income data, but income has been
> exceeding product by a large amount for the last several years, and
> no one at BEA knows exactly why.
>
> Doug

--

Michael Perelman Economics Department California State University michael at ecst.csuchico.edu Chico, CA 95929 530-898-5321 fax 530-898-5901



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