The Short Horizon Predictive Content of Aggregate Earnings

31 Pages Posted: 2 Sep 2009  

William M. Cready

University of Texas at Dallas - Naveen Jindal School of Management

Umit G. Gurun

University of Texas at Dallas - Naveen Jindal School of Management

Date Written: August 20, 2009

Abstract

Evidence documented in Howe, Unlu, and Yan [2009] shows that aggregate analyst recommendations are useful in predicting short horizon (quarter-ahead) aggregate excess market returns. In this paper we find that aggregate earnings measures constructed from underlying announcements are also very useful for predicting short horizon excess market returns, at least in the time period for which aggregate analyst recommendation data are available. An equal-weighted average of aggregate earnings explains around 17% of the variation in quarter ahead excess return. Moreover, dividend yield and aggregate analyst recommendation indices lack significance in models including this equal-weighted index.

Keywords: Corporate Earnings, Excess Aggregate Market Return, Analyst Recommendations

JEL Classification: G15, G21

Suggested Citation

Cready, William M. and Gurun, Umit G., The Short Horizon Predictive Content of Aggregate Earnings (August 20, 2009). Available at SSRN: https://ssrn.com/abstract=1465740 or http://dx.doi.org/10.2139/ssrn.1465740

William M. Cready (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Umit G. Gurun

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

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