Disaggregated Sales and Stock Returns
72 Pages Posted: 9 Jan 2017 Last revised: 29 Oct 2019
Date Written: October 28, 2019
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: Suggested Citation