Abstract
I document that a simple portfolio strategy, selling stocks with worsening business outlook, provides significant abnormal returns. I construct a portfolio of firms one day after they experience a change in business outlook for all sample trading days. Over the sample of 56 consecutive trading days, 3,502 adjustments in business outlook took place. The daily average abnormal return, produced by shorting a worsening portfolio of firms, is 0.232 %. The accumulated raw return of this portfolio over the 56 day sample period is 4.3%. The purpose of this study is two-fold. I, not only show the opportunity for a profitable portfolio strategy, but I also look at the implications that significant portfolio returns have on the usefulness and quality of employee-sourced data.
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