Are Earnings Announcements a Timely Source of Macroeconomic Information?

This study examines whether firm-level earnings announcements aggregated on a given trading day are a timely, incremental source of macroeconomic information relative to numerous competing sources of regularly-released macroeconomic information. Using an exponential GARCH model for both the first and second moments of daily market returns we find that daily earnings announcement information is significantly positively associated with conditional market volatility, but unassociated with signed-market returns. Further tests suggest that daily earnings announcements convey incremental information about economy-wide real output growth that is reflected in conditional market volatility, particularly for earnings announcements reported early in a calendar quarter and when the sign of earnings announcement information is negative. Consistent with this latter result, we find that the effect of negative earnings announcement information clusters in periods preceding and during recessions, consistent with daily earnings information possessing a timing advantage over more traditional macroeconomic variables in conveying adverse news around recessionary periods