Price Informativeness with Equity Market Factors

21 Pages Posted: 8 Jun 2021 Last revised: 18 Nov 2022

See all articles by Roger G Clarke

Roger G Clarke

Ensign Peak Advisors

Harindra de Silva

Analytic Investors, Inc.

Steven Thorley

BYU Marriott School of Business

Date Written: June 7, 2021


Price informativeness measures how and when information is aggregated into asset prices. We study the price informativeness of realized earnings growth for U.S. stocks with a focus on exposures to factors that have historically outperformed the market index. Our study includes the largest one thousand stocks from 1975 to 2019 and approximately 180 thousand individual corporate net income observations aligned by report date. Stock returns are sensitive to concurrent and realized earnings growth reports up to 15 months into the future, but not to old earnings reports. The decomposition of Value, Momentum, Small Size, Low Beta, and Profitability factor active returns into components that are explained and unexplained by earnings aids in understanding the anomalous nature of their positive market-relative performance. The active returns to Momentum stocks are largely attributable to the growth of realized earnings during the next several quarters. Low Beta, Small Size, and Profitability stocks have little of their active returns explained by realized earnings, suggesting the anomalies are associated with other drivers such as changes in expected long-term earnings growth and discount rates. In contrast, the active returns to Value stocks explained by concurrent and future realized earnings are negative.

Keywords: Price Informativeness, Factor Investing, Earnings Growth

JEL Classification: G11, G14

Suggested Citation

Clarke, Roger G and de Silva, Harindra and Thorley, Steven, Price Informativeness with Equity Market Factors (June 7, 2021). Available at SSRN: or

Roger G Clarke

Ensign Peak Advisors ( email )

60 East South Temple
4th Floor
Salt Lake City, UT 84111
United States

Harindra De Silva

Analytic Investors, Inc. ( email )

555 West 5th Street
50th Floor
Los Angeles, CA 90013
United States
213-688-3015 (Phone)
213-688-8856 (Fax)

Steven Thorley (Contact Author)

BYU Marriott School of Business ( email )

616 TNRB
Brigham Young University
Provo, UT 84602
United States
801-378-6065 (Phone)
801-378-5984 (Fax)

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