The literature on ‘cash flow' or ‘earnings' beta is theoretically well-motivated in its use of fundamentals, instead of returns, to measure systematic risk. However, empirical measures of earnings beta based on either log-linearizing the return equation or log-linearizing the clean-surplus...

This study tests and finds that stock prices around earnings announcements reflect investor aversion to negative news. We find that when forecasts are negatively skewed, indicating considerable downside risk, earnings announcement returns are eventually more positive. Announcement returns are...