We revisit the literature on using accounting earnings to estimate firm-level systematic risk, using macroeconomic indicators rather than listed-firm indexes to measure aggregate risk. Conventional listed-firm indexes reflect an unrepresentative subset of aggregate assets and thus are expected...

The accounting literature has traditionally focused on firm-level studies to examine the capital market implications of earnings and other accounting variables. We first develop the arguments for studying capital market implications at the aggregate level as well. A central issue is that...

A principal-components analysis demonstrates that common earnings factors explain a substantial portion of rm-level earnings variation, implying earnings shocks have substantial systematic components and are not almost fully diversifiable as prior literature has concluded. Furthermore, the...