Aggregate Earnings Expectations and Stock Market Behavior

Dan Givoly; Josef Lakonishok

doi:10.1177/0148558X8700200203

Aggregate Earnings Expectations and Stock Market Behavior

Dan Givoly, Josef Lakonishok

Accounting

Research output: Contribution to journal › Review article › peer-review

1 Scopus citations

Abstract

The paper examines the degree of association between cross-sectional aggregate measures of earnings forecasts and the market rate of return. Various measures of “market” earning forecasts are devised. The results indicate that while changes in earnings forecasts of individual companies are correlated with the price behavior of the respective stocks, very weak association exists between the aggregate measure of earnings forecasts and the market rate of return. This lack of association (which suggests that information on aggregate changes in earnings forecasts is not very useful to investors) is due primarily to the very low commonality in the revisions of earnings forecasts across companies.

Original language	English (US)
Pages (from-to)	117-137
Number of pages	21
Journal	Journal of Accounting, Auditing & Finance
Volume	2
Issue number	2
DOIs	https://doi.org/10.1177/0148558X8700200203
State	Published - Apr 1987

All Science Journal Classification (ASJC) codes

Accounting
Finance
Economics, Econometrics and Finance (miscellaneous)

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10.1177/0148558X8700200203

Cite this

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title = "Aggregate Earnings Expectations and Stock Market Behavior",

abstract = "The paper examines the degree of association between cross-sectional aggregate measures of earnings forecasts and the market rate of return. Various measures of “market” earning forecasts are devised. The results indicate that while changes in earnings forecasts of individual companies are correlated with the price behavior of the respective stocks, very weak association exists between the aggregate measure of earnings forecasts and the market rate of return. This lack of association (which suggests that information on aggregate changes in earnings forecasts is not very useful to investors) is due primarily to the very low commonality in the revisions of earnings forecasts across companies.",

author = "Dan Givoly and Josef Lakonishok",

note = "Funding Information: Faculty of Management, Tel Aviv University. Josef Lakonishok is currently visiting the Johnson Graduate School of Management, Cornell University. The authors gratefully acknowledge the financial support of the Institute for Quantitative Research in Finance and Israel Institute of Business Research. The authors would also like to thank the firm of Lynch Jones and Ryan for providing the data on earnings forecasts and Stanley Levine for valuable help in interpreting them. 4 1987 2 2 117 137 {\textcopyright} 1987 SAGE Publications 1987 SAGE Publications ",

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AU - Givoly, Dan

AU - Lakonishok, Josef

N1 - Funding Information: Faculty of Management, Tel Aviv University. Josef Lakonishok is currently visiting the Johnson Graduate School of Management, Cornell University. The authors gratefully acknowledge the financial support of the Institute for Quantitative Research in Finance and Israel Institute of Business Research. The authors would also like to thank the firm of Lynch Jones and Ryan for providing the data on earnings forecasts and Stanley Levine for valuable help in interpreting them. 4 1987 2 2 117 137 © 1987 SAGE Publications 1987 SAGE Publications

PY - 1987/4

Y1 - 1987/4

N2 - The paper examines the degree of association between cross-sectional aggregate measures of earnings forecasts and the market rate of return. Various measures of “market” earning forecasts are devised. The results indicate that while changes in earnings forecasts of individual companies are correlated with the price behavior of the respective stocks, very weak association exists between the aggregate measure of earnings forecasts and the market rate of return. This lack of association (which suggests that information on aggregate changes in earnings forecasts is not very useful to investors) is due primarily to the very low commonality in the revisions of earnings forecasts across companies.

AB - The paper examines the degree of association between cross-sectional aggregate measures of earnings forecasts and the market rate of return. Various measures of “market” earning forecasts are devised. The results indicate that while changes in earnings forecasts of individual companies are correlated with the price behavior of the respective stocks, very weak association exists between the aggregate measure of earnings forecasts and the market rate of return. This lack of association (which suggests that information on aggregate changes in earnings forecasts is not very useful to investors) is due primarily to the very low commonality in the revisions of earnings forecasts across companies.

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Aggregate Earnings Expectations and Stock Market Behavior

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