Abstract

http://ssrn.com/abstract=172060
 
 

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Earnings Surprises, Growth Expectations, and Stock Returns: Don't Let an Earnings Torpedo Sink Your Portfolio


Douglas J. Skinner


The University of Chicago - Booth School of Business

Richard G. Sloan


University of California at Berkeley - Haas School of Business

July 1999


Abstract:     
It is well-established that the realized returns of ?growth? stocks have been low relative to other stocks. We show that this phenomenon is explained by a large and asymmetric response to negative earnings surprises for growth stocks. After controlling for this effect, there is no longer evidence of a stock return differential between growth stocks and other stocks. Our evidence is more consistent with investors having naively optimistic expectations about the prospects of growth stocks (e.g., Lakonishok, Shleifer, and Vishny, 1994) than with the existence of unidentified risk factors that are lower for growth stocks (e.g., Fama and French, 1992).

Number of Pages in PDF File: 59

JEL Classification: G12, G14, M41

working papers series





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Date posted: July 28, 1999  

Suggested Citation

Skinner, Douglas J. and Sloan, Richard G., Earnings Surprises, Growth Expectations, and Stock Returns: Don't Let an Earnings Torpedo Sink Your Portfolio (July 1999). Available at SSRN: http://ssrn.com/abstract=172060 or http://dx.doi.org/10.2139/ssrn.172060

Contact Information

Douglas J. Skinner (Contact Author)
The University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7137 (Phone)

Chicago Booth School of Business Logo

Richard G. Sloan
University of California at Berkeley - Haas School of Business ( email )
545 Student Services Building
Berkeley, CA 94720
United States
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References:  23
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