Stock Index Earnings-Returns Lead-lag

A subscriber asked about the lead-lag relationship between S&P 500 earnings and S&P 500 Index returns. To investigate, we relate actual aggregate S&P 500 operating and as-reported earnings to S&P 500 Index returns at both quarterly and annual frequencies. Earnings forecasts are available well in advance of returns. Actual earnings releases for a quarter occur throughout the next quarter. Using quarterly S&P 500 earnings and index levels during March 1988 through March 2025 and June 2025, respectively, we find that: (more…)