Is Top Line Now Top of Mind? An empirical study on response coefficients on the Stockholm Stock Exchange
Abstract: This study examines the relationship between abnormal stock returns and surprises in both revenues and earnings on the Stockholm Stock Exchange for the years 2011 - 2015. Previous research has shown a continuously increasing size of the revenue response coefficient, which under certain conditions surpasses the value of the earnings response coefficient. We construct an OLS regression derived from Jegadeesh and Livnat's (2006) paper "Revenue Surprises and Stock Returns", with the hypothesis that the size of revenue response coefficient will exceed the size of the earnings response coefficient for our sample. Our results suggest that the explanatory power, R2, is remarkably increased by including the revenue response coefficient along with dummy variables in the regression. After including the Fama-French derived factors size and book-to-market, we ultimately find that the revenue response coefficient is statistically significant different from zero, and indicates a larger size than that of the earnings response coefficient.
AT THIS PAGE YOU CAN DOWNLOAD THE WHOLE ESSAY. (follow the link to the next page)