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1Scheller College of Business, Georgia Institute of Technology; 2University of South Carolina; 3Federal Reserve Bank of Atlanta, United States of America; 4Babson College
We develop firm-level measures of input and output price changes using textual analysis of earnings calls. We establish four facts: (1) Input prices increase (decrease) at the median firm once every 7 (30) months. (2) Input price changes contain an equal blend of aggregate and firm-specific components. (3) A firm’s stock price experiences a -1.15% return when our input price change measure is in the top tercile of price increases. Using a structural model, we relate firm markup to this stock price reaction. (4) Firms pass through 70% of their input price changes to output prices in the same quarter.
