Is it Time for Popcorn? Daily Box Office Earnings and Aggregate Stock Returns

52 Pages Posted: 29 Aug 2017 Last revised: 26 Apr 2018

Seda Oz

University of Waterloo - School of Accounting and Finance

Steve Fortin

McGill University - Desautels Faculty of Management

Date Written: April 10, 2018

Abstract

We quantitatively measure the interactions between discretionary consumption and the stock market. We use daily theatrical box office earnings as a proxy for discretionary consumption and document a statistically significant positive association between changes in box office earnings and daily aggregate stock returns. Our results suggest that changes in box office earnings can predict stock returns for up to five days. We also demonstrate hypothetical trading strategies using changes in box office earnings that yield non-trivial excess returns with little risk. These findings suggest that the box office effect is an economically important factor for equities. To the extent that box office earnings capture discretionary consumption, the framework implies that deviations from investors’ discretionary consumption trends summarize agents' expectations of future returns on the market portfolio.

Keywords: Predictability of stock returns, Information, Discretionary Consumption, Trading strategy, box office earnings, asset pricing implications

JEL Classification: G11, G12, G14

Suggested Citation

Oz, Seda and Fortin, Steve, Is it Time for Popcorn? Daily Box Office Earnings and Aggregate Stock Returns (April 10, 2018). Available at SSRN: https://ssrn.com/abstract=3026910 or http://dx.doi.org/10.2139/ssrn.3026910

Seda Oz (Contact Author)

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1 N2L 3G1
Canada

Steve Fortin

McGill University - Desautels Faculty of Management ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1
Canada
514-398-4021 (Phone)
514-398-3876 (Fax)

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