The Short Horizon Predictive Content of Aggregate Earnings
31 Pages Posted: 2 Sep 2009
Date Written: August 20, 2009
Evidence documented in Howe, Unlu, and Yan  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: Suggested Citation