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Recurring Firm Events and Predictable Returns: The Within-Firm Time Series

Author

Listed:
  • Samuel M. Hartzmark

    (Booth School of Business, University of Chicago, Chicago, Illinois 60637, USA)

  • David H. Solomon

    (Carrol School of Management, Boston College, Chestnut Hill, Massachusetts 02467, USA)

Abstract

We review the literature on recurring firm events and predictable returns. Many common firm events recur on a predictable basis, such as earnings and dividends, among others. These events tend to be associated with large positive returns in the period when the events are predicted to occur (without conditioning on the outcome or existence of the event itself). These returns occur mainly on the long side of the portfolio, are statistically and economically large when value weighted, and replicate internationally. It is difficult to explain the observed patterns with a unified risk theory. Some of the underlying causes seem to be related to idiosyncratic risk, predictable attention, probability mistakes, and demand for corporate distributions.

Suggested Citation

  • Samuel M. Hartzmark & David H. Solomon, 2018. "Recurring Firm Events and Predictable Returns: The Within-Firm Time Series," Annual Review of Financial Economics, Annual Reviews, vol. 10(1), pages 499-517, November.
    • Handle: RePEc:anr:refeco:v:10:y:2018:p:499-517
    DOI: 10.1146/annurev-financial-110217-022605
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    Citations

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    Cited by:

    1. Noh, Suzie & So, Eric C. & Verdi, Rodrigo S., 2021. "Calendar rotations: A new approach for studying the impact of timing using earnings announcements," Journal of Financial Economics, Elsevier, vol. 140(3), pages 865-893.
    2. Hirshleifer, David & Jiang, Danling & DiGiovanni, Yuting Meng, 2020. "Mood beta and seasonalities in stock returns," Journal of Financial Economics, Elsevier, vol. 137(1), pages 272-295.
    3. Felix Kreidl & Hendrik Scholz, 2021. "Exploiting the dividend month premium: evidence from Germany," Journal of Asset Management, Palgrave Macmillan, vol. 22(4), pages 253-266, July.
    4. Chen, Yong & Da, Zhi & Huang, Dayong, 2022. "Short selling efficiency," Journal of Financial Economics, Elsevier, vol. 145(2), pages 387-408.
    5. Grullon, Gustavo & Kaba, Yamil & Núñez-Torres, Alexander, 2020. "When low beats high: Riding the sales seasonality premium," Journal of Financial Economics, Elsevier, vol. 138(2), pages 572-591.

    More about this item

    Keywords

    asset pricing; recurring events; return predictability; seasonality; earnings; dividends;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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