Disaggregated Sales and Stock Returns
81 Pages Posted: 9 Jan 2017 Last revised: 3 Jan 2018
Date Written: January 3, 2018
Using transaction-level credit card spending from a large US financial institution, we show that disaggregated sales provide accurate and persistent signals of customer demand relevant to a firm’s stock pricing. After controlling for earnings and sales surprises, one inter-quintile increase in the adjusted customer spending during a firm’s fiscal quarter leads to 0.3 (1.7) percentage points increase in the 3-day announcement (60-day post-earnings-announcement) CARs. The predictive power is stronger in firms with more sales from high-spending-capacity consumers or with more diversified consumer base. The adjusted customer spending also predicts future firm earnings and sales surprises.
Keywords: return predictability, disaggregated sales, customer demand, credit cards, consumption, household finance, financial institution, big data
JEL Classification: D12, G14, H31
Suggested Citation: Suggested Citation