An Empirical Analysis of Anomalies in the Relationship between Earnings’ Yield and Returns of Common Stocks: The Case of Hotel and Lodging Firms

Abstract

The impact of earnings information on common stock returns is a subject of recurring interest in finance literature. A cross-sectional time series regression was conducted to analyze the relationship between earnings’ yield and common stock returns of 27 hotel and lodging firms, using monthly data for the 1963–1992 period. Findings showed that the earnings effect established in the conventional framework also applies to common stocks of hotel and lodging firms. As such, the nature of the earnings effect within hotel and lodging industry securities is better understood, and some significant anomalies in the relationship between earnings’ yield and the returns of hotel and lodging securities are revealed.

Keywords

earnings effect stock return anomalies generalized least square regression

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