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Market Return And Aggregate Earnings News
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Book Synopsis Directional Aggregate Earnings News and Market Returns by : Debjeet Pradhan
Download or read book Directional Aggregate Earnings News and Market Returns written by Debjeet Pradhan and published by . This book was released on 2014 with total page 158 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, I examine the properties of positive and negative aggregate earnings changes and how they relate to contemporaneous market returns. I find that the negative relationship between aggregate earnings news and market returns, documented in Kothari et al. (2006) and Cready and Gurun (2010), is driven primarily by bad news observations. I also find that negative aggregate earnings changes mean revert in the two quarters following the negative aggregate earnings changes quarter. Market returns increase contemporaneously with negative aggregate earnings news, suggesting that investors incorporate the expectation of mean reversion for negative aggregate earnings changes in subsequent quarters. As a result, the aggregate earnings news market returns relationship is negative when aggregate earnings news is negative. When aggregate earnings news is positive, I find that market returns are positively associated with aggregate earnings news. Since aggregate earnings news consists of cash flow and discount rate news components, each having an opposite direction effect on market return, the cash flow news component dominates the discount rate news component when aggregate earnings news is positive, while the discount rate news component dominates the cash flow news component when aggregate earnings news is negative.
Book Synopsis Market Return and Aggregate Earnings News by : William M. Cready
Download or read book Market Return and Aggregate Earnings News written by William M. Cready and published by . This book was released on 2009 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: A recent analysis by Kothari, Lewellen and Warner(2006) report negative relations between aggregate earnings surprise and market return in quarterly earnings disclosure and reporting periods and no evidence of a positive relation between aggregate earnings and market return in any post-disclosure quarters. In this analysis we develop approaches aimed at better isolating aggregate earning's news component and find strong evidence of a positive relation between aggregate earnings surprise and return in the quarter following the earnings disclosure quarter. This pattern is consistent with the market not fully incorporating discount rate shock and cash flow implications of aggregate earnings in the disclosure period.
Book Synopsis Aggregate Earnings, Stock Market Returns and Macroeconomic Activity by : Lakshmanan Shivakumar
Download or read book Aggregate Earnings, Stock Market Returns and Macroeconomic Activity written by Lakshmanan Shivakumar and published by . This book was released on 2007 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: Anilowski, Feng and Skinner (Journal of Accounting and Economics, 2006, this issue) examine the relationship between aggregate earnings guidance, aggregate earnings news and market returns. They provide evidence that changes in aggregate proportions of downward or upward earnings guidance are associated with aggregate earnings news and weakly associated with market returns. However, the study is unable to establish causality or the precise nature of the relationship between aggregate earnings guidance and market returns. To better understand the relationship, this paper analyses the relation between aggregate earnings, stock market returns and the macroeconomy. I empirically document that aggregate earnings primarily contain information about future inflation. This inflation information in aggregate earnings causes aggregate earnings to be negatively correlated with stock returns. The paper concludes with suggestions for future research.
Book Synopsis Aggregate Market Reaction to Earnings Announcements by : Umit G. Gurun
Download or read book Aggregate Market Reaction to Earnings Announcements written by Umit G. Gurun and published by . This book was released on 2009 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper identifies a distinct immediate announcement period negative relation between earnings announcement surprises and aggregate market returns. Such a relation implies that market participants use earnings information in forming expectations about expected aggregate discount rates and, specifically, that good earnings news is associated with a positive shock to required returns. We also find some evidence that this negative relation persists well beyond the immediate announcement period, suggesting that market participants do not immediately fully impound these future market return implications of aggregate earnings news.
Book Synopsis Trading on Corporate Earnings News by : John Shon
Download or read book Trading on Corporate Earnings News written by John Shon and published by FT Press. This book was released on 2011-03-09 with total page 225 pages. Available in PDF, EPUB and Kindle. Book excerpt: Profit from earnings announcements, by taking targeted, short-term option positions explicitly timed to exploit them! Based on rigorous research and huge data sets, this book identifies the specific earnings-announcement trades most likely to yield profits, and teaches how to make these trades—in plain English, with real examples! Trading on Corporate Earnings News is the first practical, hands-on guide to profiting from earnings announcements. Writing for investors and traders at all experience levels, the authors show how to take targeted, short-term option positions that are explicitly timed to exploit the information in companies’ quarterly earnings announcements. They first present powerful findings of cutting-edge studies that have examined market reactions to quarterly earnings announcements, regularities of earnings surprises, and option trading around corporate events. Drawing on enormous data sets, they identify the types of earnings-announcement trades most likely to yield profits, based on the predictable impacts of variables such as firm size, visibility, past performance, analyst coverage, forecast dispersion, volatility, and the impact of restructurings and acquisitions. Next, they provide real examples of individual stocks–and, in some cases, conduct large sample tests–to guide investors in taking advantage of these documented regularities. Finally, they discuss crucial nuances and pitfalls that can powerfully impact performance.
Book Synopsis Stock Returns, Aggregate Earnings Surprises, and Behavioral Finance by : Jonathan Lewellen
Download or read book Stock Returns, Aggregate Earnings Surprises, and Behavioral Finance written by Jonathan Lewellen and published by . This book was released on 2009 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the stock market reaction to aggregate earnings news. Previous research shows that, for individual firms, stock prices react positively to earnings news but require several quarters to fully reflect the information in earnings. We find that the relation between returns and earnings is substantially different in aggregate data. First, returns are unrelated to past earnings, suggesting that prices neither underreact nor overreact to aggregate earnings news. Second, aggregate returns are negatively correlated with concurrent earnings; over the last 30 years, stock prices increased 6.5% in quarters with negative earnings growth and only 1.9% otherwise. This finding suggests that earnings and discount rates move together over time, and provides new evidence that discount-rate shocks explain a significant fraction of aggregate stock returns.
Book Synopsis Does Earnings Guidance Affect Market Returns? The Nature and Information Content of Aggregate Earnings Guidance by : Carol Anilowski Cain
Download or read book Does Earnings Guidance Affect Market Returns? The Nature and Information Content of Aggregate Earnings Guidance written by Carol Anilowski Cain and published by . This book was released on 2007 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate whether earnings guidance affects aggregate stock returns through its effects on expectations about overall earnings performance and/or aggregate expected returns. We find that aggregate guidance, especially relative levels of quarterly downward guidance, is associated with analyst- and time-series-based measures of aggregate earnings news. We find more modest evidence that guidance, again, largely downward guidance, is associated with market returns - market returns appear to respond to guidance toward the end of each calendar quarter, when most earnings preannouncements are released, and there is some evidence that firm-level guidance affects market returns in short windows around its release.
Book Synopsis Interim Versus Fourth Quarter Aggregate Earnings-return Relations by : Ting He
Download or read book Interim Versus Fourth Quarter Aggregate Earnings-return Relations written by Ting He and published by . This book was released on 2012 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior literature documents that the fourth quarter earnings and the stock market's reactions to fourth quarter earnings news differ from those of interim quarters at the firm level. This study examines whether differential market reactions to quarterly earnings news at the firm level extend to the market level. In contrast to previous firm-level findings, I find that aggregate fourth quarter earnings-return relations are stronger than aggregate interim quarter earnings-return relations. Specifically, aggregate fourth quarter earnings are negatively related to contemporaneous market returns, but there is little evidence for interim quarter earnings. In addition, the positive predictive content of annual accruals is driven by aggregate fourth quarter accruals.
Book Synopsis Aggregate Earnings Surprises, Monetary Policy, and Stock Returns by : Lindsey A. Gallo
Download or read book Aggregate Earnings Surprises, Monetary Policy, and Stock Returns written by Lindsey A. Gallo and published by . This book was released on 2016 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines whether the negative association between aggregate earnings and returns is explained by the monetary policy news in aggregate earnings. Using Federal funds futures data to construct a measure of policy news, we find that aggregate earnings convey information about the Fed's policy actions. Additionally, the negative aggregate earnings-returns association is muted when we control for policy surprises. This result is more pronounced in periods with negative policy surprises, which tend to trigger a more significant market reaction. Taken together, these results suggest that aggregate earnings convey policy news and the market reacts negatively to policy surprises, which drives the negative aggregate earnings-returns association.
Book Synopsis Detecting News in Aggregate Accounting Earnings by : Panos N. Patatoukas
Download or read book Detecting News in Aggregate Accounting Earnings written by Panos N. Patatoukas and published by . This book was released on 2014 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: How much news is there in aggregate accounting earnings? I provide evidence that earnings changes at the stock market level are correlated with new information about not only expected future cash flows but also discount rates. A comprehensive investigation of the link to discount rates reveals that aggregate earnings changes are tied to news about all components of the expected future stock market return, i.e., the real riskless rate, expected inflation, and the expected equity risk premium. Over the sample period studied, cash flow news and discount rate news in aggregate earnings changes covary positively and have offsetting impacts on stock market prices. As a result, stock market prices appear to be insensitive to aggregate earnings changes. The findings highlight the importance of separating cash flow news from discount rate news when evaluating the information content of accounting earnings at the stock market level. Overall, my study sheds new light on the informativeness and relevance of accounting earnings for valuation at the stock market level.
Book Synopsis Stock Returns, Aggregate Earnings Surprises, and Behavioral Finance by : S. P. Kothari
Download or read book Stock Returns, Aggregate Earnings Surprises, and Behavioral Finance written by S. P. Kothari and published by . This book was released on 2003 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the stock market reaction to aggregate earnings news. Previous research shows that, for individual firms, stock prices react positively to earnings news but require several quarters to fully reflect the information in earnings. We find that the relation between returns and earnings is substantially different in aggregate data. First, returns are unrelated to past earnings, suggesting that prices neither underreact nor overreact to aggregate earnings news. Second, aggregate returns are negatively correlated with concurrent earnings; over the last 30 years, stock prices increased 6.5% in quarters with negative earnings growth and only 1.9% otherwise. This finding suggests that earnings and discount rates move together over time, and provides new evidence that discount-rate shocks explain a significant fraction of aggregate stock returns. JEL Classification: G12, G14, M41.
Book Synopsis Stock Returns, Aggregate Earnings Surprises, and Behavioural Finance - An Empirical Study on Indian Market by : Narayan Rao Sapar
Download or read book Stock Returns, Aggregate Earnings Surprises, and Behavioural Finance - An Empirical Study on Indian Market written by Narayan Rao Sapar and published by . This book was released on 2017 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the stock market's reaction to aggregate earnings news and better understand the relationship among earnings, stock prices, and discount rates Prior research shows that, for individual firms, stock prices react positively to earnings news but require several quarters to fully reflect the information in earnings. Our analysis shows that the market's reaction to aggregate earnings is quite similar to its reaction to firm earnings. Taking all of the results together, we find some evidence that prices react slowly to aggregate earnings news. The evidence supports the recent behavioral finance theories which explain post-earnings announcement drift in firm level are also applicable at the aggregate level. The results also provide new evidence on the connections among prices, earnings, and discount rates. The autocorrelations among earnings suggest that relationship between the current earnings over its previous earnings is predominantly negative and past earnings have little power to predict future earnings. The analysis also shows that earnings are correlated with changes in proxies for discount rates. However, the limited data set available could bound the significance of the results.
Book Synopsis Aggregate Earnings and Market Returns by : Wen He
Download or read book Aggregate Earnings and Market Returns written by Wen He and published by . This book was released on 2016 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Kothari, Lewellen and Warner (2006) document that in the U.S. market aggregate earnings changes are negatively related to contemporaneous market returns. This is puzzling given the well-documented evidence that firm-level earnings changes are positively related to stock returns. In this study we use a sample of 28 countries to provide international evidence on this important issue. In pooled cross-country and time-series regressions, we find that aggregate earnings changes are positively associated with contemporaneous market returns. When we run time-series regressions of market returns on aggregate earnings changes for each country, we find only four countries have negative coefficients for aggregate earnings changes and none of these negative coefficients are statistically significant. This evidence contrasts the U.S. evidence. Furthermore aggregate earnings exhibits substantial persistence, suggesting current earnings convey information about future earnings. Finally we find that the earnings-returns relation at aggregate becomes less positive in countries with more transparent accounting disclosure. This result supports the argument proposed by Sadka and Sadka (2009) that predictability of aggregate earnings leads to the negative relation between aggregate earnings and market returns in the U.S.
Book Synopsis Aggregate Earnings and Corporate Bond Markets by : Xanthi Gkougkousi
Download or read book Aggregate Earnings and Corporate Bond Markets written by Xanthi Gkougkousi and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: I examine the previously unexplored relation between aggregate earnings changes and corporate bond market returns. I find that aggregate earnings changes have a negative relation to investment-grade corporate bond market returns and a positive relation to high-yield corporate bond market returns. The aggregate earnings-returns relation is lower (i.e., less positive or more negative) for bonds with higher credit ratings and longer maturities. Further, I show that the aggregate earnings-returns relation is driven by both the expected and the news component of aggregate earnings changes. The expected component is negatively related to expected returns, and the news component is positively related to cash flow news and changes in nominal interest rates, and negatively related to changes in default premia. My results contribute to the understanding of the role of earnings in corporate bond markets as well as the macroeconomic role of accounting information.
Book Synopsis Is the U.S. Unique? International Evidence on the Aggregate Earnings-Returns Association by : Lindsey A. Gallo
Download or read book Is the U.S. Unique? International Evidence on the Aggregate Earnings-Returns Association written by Lindsey A. Gallo and published by . This book was released on 2018 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: We exploit differences in institutional and macroeconomic environments to shed light on what drives variation in the aggregate earnings-returns relation over time within the U.S. and across countries. We find that both intertemporal and cross-country variation in the aggregate earnings-returns association are driven primarily by two factors, namely, the monetary policy news conveyed in aggregate earnings and the market reaction to that news, which suggest that the strength of the discount rate news channel plays an important role in explaining the aggregate earnings-returns relation both within and outside of the U.S. We further find that institutional characteristics have a significant effect on the information content of aggregate earnings and hence on the aggregate earnings-returns association--aggregate earnings are more informative about policy changes in countries with stronger investor protection and greater accounting transparency. Overall, our study provides new evidence on what drives the aggregate earnings-returns relation across the globe.
Book Synopsis Aggregate Short Selling, Commonality, and Stock Market Returns by : Andrew A. Lynch
Download or read book Aggregate Short Selling, Commonality, and Stock Market Returns written by Andrew A. Lynch and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a comprehensive data set of short-sale transactions, we find strong evidence of commonality in daily shorting flows of individual stocks. More importantly, we find that aggregate shorting forecasts market returns. A one standard deviation increase in daily aggregate shorting is associated with a decrease in market excess return by up to 36 bps over the following 10 trading days (9% annualized). In addition, we find modest evidence that short sellers are informed about future aggregate earnings news, macroeconomic news, and investor sentiment. Overall, our results are consistent with short sellers possessing superior short-term market-wide information.
Book Synopsis The Handbook of Corporate Earnings Analysis by : Brian R. Bruce
Download or read book The Handbook of Corporate Earnings Analysis written by Brian R. Bruce and published by Irwin Professional Publishing. This book was released on 1994 with total page 398 pages. Available in PDF, EPUB and Kindle. Book excerpt:
