Using a standard framework from Keynesian economics, we provide novel insights on the dynamic nature of the aggregate earnings-return relation. Aggregate earnings are a measure of aggregate output, and as such, they capture demand and supply shocks. Demand shocks could have positive or negative...

Aggregate investment and consumption have heterogeneous cyclical implications on firm-level earnings and the cyclical earnings patterns are associated with future abnormal returns. Earnings cyclicalities give rise to an information channel through which anticipated changes in investment and...