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The real-time information content of macroeconomic news: implications for firm-level earnings expectations

Carabias, Jose M. (2018) The real-time information content of macroeconomic news: implications for firm-level earnings expectations. Review of Accounting Studies, 23 (1). pp. 136-166. ISSN 1380-6653

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Identification Number: 10.1007/s11142-017-9436-9


This paper investigates the usefulness of the real-time macroeconomic news-flow as a leading indicator of firm-level end-of-quarter realized earnings. Using recent advances in macroeconomics, I develop a nowcasting model for quarterly earnings and provide two main findings. First, I show that my model provides out-of-sample expectations that are as accurate as analysts’ forecasts. Second, macroeconomic news embedded in my nowcasts is not fully incorporated into investors’ earnings expectations and predicts future abnormal returns around earnings announcements. These findings have three main implications for capital markets research. First, real-time macroeconomic news can be used to update earnings expectations in real-time. Second, there are economic benefits of doing so, as evidenced by the magnitude of risk-adjusted returns around earnings announcements. Third, after three decades of almost nonexistent research on time-series models for quarterly earnings, the door is open again for fruitful research in this area.

Item Type: Article
Official URL:
Additional Information: © 2018 The Author
Divisions: Accounting
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HF Commerce > HF5601 Accounting
H Social Sciences > HG Finance
JEL classification: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
M - Business Administration and Business Economics; Marketing; Accounting > M4 - Accounting and Auditing > M41 - Accounting
Date Deposited: 09 Jan 2018 09:43
Last Modified: 20 Oct 2021 01:23

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