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In Search of FundamentalsZhi DaUniversity of Notre Dame - Mendoza College of Business Joseph EngelbergUniversity of California, San Diego (UCSD) - Rady School of Management Pengjie GaoUniversity of Notre Dame - Mendoza College of Business March 15, 2011 AFA 2012 Chicago Meetings Paper Abstract: We use search volume for firms' products to predict revenue surprises, earnings surprises and earnings announcement returns. We find that increases (decreases) in the search volume index (SVI) of a firm's most popular product strongly predicts positive (negative) revenue surprises. This predictive power is weaker for standardized unexpected earnings (SUE). SVI has strong predictability for returns around earnings announcements, especially among firms with few products, growth firms and firms that manage their reported earnings. Taken together, the evidence suggests that search volume for a firm's products is a value-relevent leading indicator about a firm's future cashflow that the market does not fully incorporate into prices until the earnings announcement.
Number of Pages in PDF File: 36 Keywords: Search Volume, Earnings Surprises, Revenue Surprises JEL Classification: G10, G14 working papers seriesDate posted: April 22, 2010 ; Last revised: March 16, 2011Suggested CitationContact Information
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