Earnings Dispersion and Aggregate Stock Returns

Bjørn N. Jørgensen*, Jing Li, Gil Sadka

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review


This paper studies the relation between aggregate stock returns and contemporaneous and future cross-sectional earnings dispersion. We hypothesize that increases in expected earnings dispersion signal increases in uncertainty and increases in unemployment, thereby causing expected returns to rise, which in turn causes prices to decline. We find a positive relation between aggregate stock returns and contemporaneous earnings dispersion because higher earnings dispersion is associated with higher expected returns. Consequently, we also find a negative relation between aggregate stock returns and future (one-year ahead) earnings dispersion, as investors anticipate higher future earnings dispersion and higher expected returns.
Original languageEnglish
JournalJournal of Accounting and Economics
Issue number1-2
Pages (from-to)1-20
Number of pages20
Publication statusPublished - 2012
Externally publishedYes


  • Accounting valuation
  • Earnings dispersion
  • Expected-return variation
  • Profitability

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