Recurring Firm Events and Predictable Returns: The Within-Firm Time-Series

Abstract

We review the literature on recurring firm events and predictable returns. Many common firm events recur on a predictable basis, such as earnings and dividends, among others. These events tend to be associated with large positive returns in the period when those events are predicted to occur (without conditioning on the outcome or existence of the event itself). These returns occur mainly on the long side of the portfolio, are statistically and economically large when value weighted, and replicate internationally. It is difficult to explain the patterns with a unified risk theory. Some of the underlying causes seem to be related to idiosyncratic risk, predictable attention, probability mistakes and demand for corporate distributions.

Keywords: Asset Pricing, Recurring Events, Return Predictability, Seasonality

JEL Classification: G02, G11, G12, G14