Disaggregated Sales and Stock Returns

72 Pages Posted: 9 Jan 2017 Last revised: 29 Oct 2019

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Wenlan Qian

National University of Singapore - NUS Business School

Xin Zou

Hong Kong Baptist University (HKBU)

Date Written: October 28, 2019

Abstract

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 0.4 (1.5) percentage points increase in the 3-day announcement (60-day post-earnings-announcement) CAR. The predictability concentrates in consumer-oriented firms. We find a stronger return response to spending from high FICO score, high liquidity, or loyal customers. Finally, the return implications of adjusted customer spending extend to firms along the production chain.

Keywords: return predictability, disaggregated sales, customer demand, credit cards, consumption, household finance, financial institution, big data

JEL Classification: D12, G14, H31

Suggested Citation

Agarwal, Sumit and Qian, Wenlan and Zou, Xin, Disaggregated Sales and Stock Returns (October 28, 2019). Asian Finance Association (AsianFA) 2018 Conference. Available at SSRN: https://ssrn.com/abstract=2892184 or http://dx.doi.org/10.2139/ssrn.2892184

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Wenlan Qian

National University of Singapore - NUS Business School ( email )

15 Kent Ridge Drive
Singapore 117592, 119245
Singapore
(65) 65163015 (Phone)

HOME PAGE: http://sites.google.com/site/wenlanqian/

Xin Zou (Contact Author)

Hong Kong Baptist University (HKBU) ( email )

Kowloon
Hong Kong

HOME PAGE: http://sites.google.com/site/shirleyxinzou/

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