Does Earnings Guidance Affect Market Returns? The Nature and Information Content of Aggregate Earnings Guidance
Carol Anilowski Cain
Wake Forest University
University of Pittsburgh - Katz Graduate School of Business
Douglas J. Skinner
The University of Chicago - Booth School of Business
Journal of Accounting & Economics (JAE), Vol. 44, No. 1-2, pp. 36-63, 2007
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.
Number of Pages in PDF File: 49
Keywords: earnings guidance, management forecasts, aggregate earnings, macroeconomic news
JEL Classification: E44, G14, G29, M41, M45Accepted Paper Series
Date posted: August 21, 2007
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