This paper studies the relation between aggregate stock returns and contemporaneous and future cross-sectional earnings dispersion. We hypothesize that increases in expected earnings dispersion signal increases in uncertainty and increases in unemployment, thereby causing expected returns to...

We construct an earnings based zero-investment portfolio that is related to the business cycle. The portfolio, PMN, is long in stocks that have had high earnings changes in the last quarter and is short in stocks that have had low earnings changes in the last quarter. PMN is related to future...

This paper studies the effects of predictability on the earnings-returns relation for individual firms and for the aggregate. We demonstrate that prices better anticipate earnings growth at the aggregate level than at the firm level, which implies that random-walk models are inappropriate for...

In an efficient market, prices should vary only if investors change their expectations about cash flows, discount factors, or both. Prior research showed that dividend yield varies mostly due to variation in expected returns, and contains little information about cash flow. This literature...

This paper examines the circumstances under which a growth explanation or a persistence explanation is a more likely explanation for accrual mispricing and whether accruals or cash from operations is a better measure of the mispricing. We hypothesize that mispricing of growth and a fixation on...

Previous studies document that market reactions to firm-level earnings news are stronger during good times than in bad times. We find that this result is driven by small firms. In fact, the market reaction to large firms' earnings news is weaker during economic expansions than contractions. We...

This paper studies the effects of predictability on the earnings-returns relation for individual firms and for the aggregate. We demonstrate that prices better anticipate earnings growth at the aggregate level than at the firm level, which implies that random-walk models are inappropriate for...

In an efficient capital market, asset prices vary when investors change their expectations about cash flows, discount rates, or both. Using dividends to measure cash flows, previous research shows that the aggregate dividend-price ratio varies due to changes in expected discount rates (returns)...

While aggregate earnings should affect aggregate stock returns, standard portfolio theory predicts that the cross-sectional dispersion in firm-level earnings per se would not affect aggregate stock returns. Nonetheless, this paper documents that cross-sectional earnings dispersion is positively...

We examine effects of government actions and related accounting policies on the corporate bond market implied by changes in relations between aggregate bond returns and cash flow and discount rate news. We capture the influence of risk by partitioning bonds into investment and speculative...