Earnings News and Aggregate Stock Returns
Coauthor(s): Jung Ho Choi, Alon Kalay.
In contrast to firm-level relations, prior literature finds aggregate earnings changes and
aggregate stock returns are negatively related. This paper constructs new measures of aggregate
earnings news based on revisions in analyst forecasts. Findings suggest aggregate earnings news
is positively related to contemporaneous stock returns. Results also show that aggregate stock
returns are positively related to unexpected aggregate forecast errors, and negatively associated
with expected aggregate earnings growth. Taken together, these findings suggest the negative
relation between aggregate earnings changes and aggregate contemporaneous stock returns
results from the expected component of aggregate earnings, rather than aggregate earnings
Choi, Jung Ho, Alon Kalay, and Gil Sadka. "Earnings News and Aggregate Stock Returns." Columbia Business School, 2011.