Is it Time for Popcorn? Daily Box Office Earnings and Aggregate Stock Returns
52 Pages Posted: 29 Aug 2017 Last revised: 26 Apr 2018
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: Suggested Citation