Abstract
Evidence documented in Howe, Unlu, and Yan [2009] shows that aggregate analyst recommendations are useful in predicting short horizon (quarter-ahead) aggregate excess market returns. In this paper we find that aggregate earnings measures constructed from underlying announcements are also very useful for predicting short horizon excess market returns, at least in the time period for which aggregate analyst recommendation data are available. An equal-weighted average of aggregate earnings explains around 17% of the variation in quarter ahead excess return. Moreover, dividend yield and aggregate analyst recommendation indices lack significance in models including this equal-weighted index.
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