Is it Time for Popcorn? Daily Box Office Earnings and Aggregate Stock Returns
67 Pages Posted: 29 Aug 2017
Date Written: August 27, 2017
We quantitatively measure the interactions between the discretionary consumption and the stock market. We demonstrate daily theatrical box office earnings as a proxy for the 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 up to 4 days. We also demonstrate a hypothetical trading strategy using changes in box office earnings that yields nontrivial excess returns with little risk. These findings suggest that 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