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Collins Collins, Kothari Kothari, Rayburn Rayburn (1987)
Firm size and information content of prices with respect to earningsJournal of Accounting and Economics, 9
Christie Christie (1987)
On cross‐sectional analysis in accounting researchJournal of Accounting and Economics, 9
Fama Fama, French French (1993)
Common risk factors in the returns on stocks and bondsJournal of Financial Economics, 33
Jegadeesh Jegadeesh, Titman Titman (1993)
Returns to buying winners and selling losers: Implications for stock market efficiencyJournal of Finance, 48
Bernard (1989)
Post-earnings-announcement drift: Delayed price response or risk premiumJournal of Accounting Research, 27
Ayers (1997)
Market assessment of industry and firm earnings informationJournal of Accounting and Economics, 24
Freeman Freeman, Tse Tse (1992)
A nonlinear model of security price responses to unexpected earningsJournal of Accounting Research, 30
Moskowitz Moskowitz, Grinblatt Grinblatt (1999)
Do industries explain momentumJournal of Finance, 54
Beaver (1979)
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Atiase (1985)
Predisclosure information, firm capitalization and security price behavior around earnings announcementsJournal of Accounting Research, 23
Freeman Freeman (1987)
The association between accounting earnings and security returns for large and small firmsJournal of Accounting and Economics, 9
Das Das, Lev Lev (1994)
Nonlinearity in the returns‐earnings relation: Tests of alternative specifications and explanationsContemporary Accounting Research, 11
This paper presents evidence that the positive association between firm size and price leads of earnings is not solely a function of private search incentives for firm‐specific information. Specifically, we find that small‐firm prices also lag large‐firm prices with respect to industry‐wide information. Our empirical analysis extends Collins, Kothari, and Rayburn 1987 and Freeman 1987, who document that security‐price leads of earnings are positively associated with market capitalization. In particular, we examine the association between firm size and the timing of security returns for two components of annual earnings changes: the average change for a firm's industry and the firm's idiosyncratic change. We find that large firms' prices have a longer lead than small firms' prices with respect to both components. Large firms' early lead on industry‐wide earnings suggests that returns of large firms predict returns of same‐industry small firms. To test this implication, we construct a portfolio of long (short) positions in small firms when the prior month's returns of large firms in their industry are above (below) average for large firms in other industries. This zero investment portfolio earns 4.5 percent over 12 months.
Contemporary Accounting Research – Wiley
Published: Jun 1, 2000
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