Is Guidance a Macro Factor? 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
AAA 2005 FARS Meeting Paper
Journal of Accounting & Economics (JAE), Forthcoming
Although a great deal of research documents the information content of management earnings forecasts at the firm level, there is little research on the informativeness of aggregate earnings guidance. We argue that aggregate earnings guidance is potentially informative at the market/economy level through its effects on expectations about market-level expected future cash flows and 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 also find some evidence that guidance - again, largely downward guidance - is associated with market returns.
Number of Pages in PDF File: 53
Keywords: Earnings guidance, management earnings forecasts
JEL Classification: G12, G14, M41, G29
Date posted: August 4, 2005
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