City Research Online

Abstract

We study the aggregate impact of information spillovers emerging from industry star firms. Changes in stars’ relative earnings growth predict future earnings growth, consensus earnings surprises, and job postings of same-industry nonstar firms. Star-firm performance also predicts industry-level GDP and employment growth. Price markup and innovation spillovers are potential channels underlying these patterns. Our results further show that this performance predictability is not fully incorporated into nonstars’ stock prices. A long–short portfolio based on star firms’ earnings growth earns an annualized six-factor alpha of 8.64%. Together, our findings provide consistent evidence of the economic importance of star firms.

Publication Type:	Article
Additional Information:	This article has been published in a revised form in Journal of Financial and Quantitative Analysis https://jfqa.org/2026/01/06/star-firms-information-spillovers-and-predictable-industry-level-outcomes/. This version is free to view and download for private research and study only. Not for re-distribution or re-use. © copyright holder.
Publisher Keywords:	Star firms, sell-side equity analysts, earnings predictability, return predictability, information spillover
Subjects:	H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HG Finance
Departments:	Bayes Business School Bayes Business School > Faculty of Finance
SWORD Depositor:	Symplectic Administrator

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