This study provides theory and evidence to demonstrate how relative firm profitability within an industry affects stock return sensitivity to industry-level news. Extending the Cournot and Bertrand competition models, we predict that (1) the returns of less profitable firms in an industry are...

Using Zhang (2000) as the theoretical basis, we predict and empirically test the effect of investment growth on the relation between equity value and accounting variables. We find that (i) growth increases the slope in the value-earnings relation for high-profitability firms (consistent with...