Disaggregated Sales and Stock Returns

Sumit Agarwal (), Wenlan Qian () and Xin Zou ()
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Sumit Agarwal: Department of Finance, NUS Business School, National University of Singapore, Singapore 119245
Wenlan Qian: Department of Finance, NUS Business School, National University of Singapore, Singapore 119245
Xin Zou: Department of Finance and Decision Science, Hong Kong Baptist University, WLB901 Kowloon Tong, Hong Kong

Management Science, 2021, vol. 67, issue 11, 7167-7183

Abstract: Using transaction-level credit-card spending from a large U.S. financial institution, we show that disaggregated sales provide accurate and persistent signals of customer demand relevant to a firm’s stock pricing. After controlling for earnings and sales surprises, one interquintile increase in the adjusted customer spending during a firm’s fiscal quarter leads to a 1.5 percentage point increase in the 60-day post–earnings announcement cumulative abnormal return. The predictability concentrates in consumer-oriented firms, especially those relying more on indirect sales distribution channels. We also find a stronger return response to spending from high-FICO-score, high-liquidity, and loyal customers. The transmission speed of disaggregated sales information is slower than that of the earnings information, and small firms or firms far from their end customers exhibit a more delayed price response. Finally, the return implications of adjusted customer spending extend to firms along the production chain.

Keywords: return predictability; informed investors; disaggregated sales; customer demand; credit cards; consumption; household finance; financial institution; big data (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (5)

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