We examine the relation between firms' voluntary guidance and mandatory 8K filings. We find a negative relation between guidance and 8Ks, which strengthens following the 2004 expansion of mandatory 8K requirements, consistent with firms using the disclosures as substitutes. Increases in 8Ks coincide with declines in firms’ profits, but this negative relation weakens after the 2004 regulation, consistent with firms broadening the scope of information conveyed through 8Ks. Together, our findings suggest firms became more reliant on 8Ks to convey general types of information after the 2004 regulation, rather than primarily negative news, which reduces their incentives to issue guidance.

We show that the cost of trading on negative news, relative to positive news, increases before earnings announcements. Our evidence suggests that this asymmetry is due to financial intermediaries reducing their exposure to announcement risks by providing liquidity asymmetrically. This asymmetry creates a predictable upward bias in prices that increases preannouncement, and subsequently reverses, confounding short‐window announcement returns as measures of earnings news and risk premia. These findings provide an alternative explanation for asymmetric return reactions to firms' earnings news, and help explain puzzling prior evidence that announcement risk premia precede the actual announcements. Our study informs methods for research centering on earnings announcements and offers a possible explanation for patterns in returns around anticipated periods of heightened inventory risks, including alternative firm‐level, industry‐level, and macroeconomic information events.

Using novel earnings calendar data, we show that firms’ advanced scheduling of earnings announcement dates foreshadows their earnings news. Firms that schedule later-than-expected announcement dates subsequently announce worse news than those scheduling earlier-than-expected announcement dates. Despite scheduling disclosures being observable weeks ahead of earnings announcements, we show that equity markets fail to reflect the information in these disclosures until the announcement itself. By also showing that option markets respond efficiently to volatility-timing information embedded in the same scheduling disclosures, we provide novel evidence that markets fail to react to information about future earnings despite investors immediately trading on the underlying signal.

We show that analyst coverage proxies contain information about expected returns. We decompose analyst coverage into abnormal and expected components using a simple characteristic-based model and show that firms with abnormally high analyst coverage subsequently outperform firms with abnormally low coverage by approximately 80 basis points per month. We also show abnormal coverage rises following exogenous shocks to underpricing and predicts improvements in firms’ fundamental performance, suggesting that return predictability stems from analysts more heavily covering underpriced stocks. Our findings highlight the usefulness of analysts’ actions in expected return estimations, and a potential inference problem when coverage proxies are used to study information asymmetry and dissemination.

We examine how the information produced by analysts when they initiate coverage contributes to the mix of firm-specific, industry-, and market-wide information available about the firm. We hypothesize that the first analyst to initiate coverage provides low-cost market and industry information allowing him/her to follow more stocks, whereas subsequent analysts provide firm-specific information to distinguish themselves from existing analysts. We use stock return synchronicity to measure the mix of information available about a firm, with higher synchronicity indicating more industry and market information. Coverage initiations of firms with no prior analyst coverage increase synchronicity, suggesting that analysts produce industry- and market-wide information. In contrast, analysts initiating coverage on firms with existing coverage appear to focus on producing firm-specific information as these initiations lead to reduced synchronicity. Together, our findings indicate that the type of information that analysts produce at initiation depends on the information provided by other analysts. Data Availability: All data are available from public sources identified in the paper.

We introduce a parsimonious framework for choosing among alternative expected-return proxies (ERPs) when estimating treatment effects. By comparing ERPs’ measurement error variances in the cross-section and in the time series, we provide new evidence on the relative performance of firm-level ERPs nominated by recent studies. Generally, “implied-costs-of-capital” metrics perform best in the time series, whereas “characteristic-based” proxies perform best in the cross-section. Factor-based ERPs, even the latest renditions, perform poorly. We revisit four prior studies that use ex ante ERPs and illustrate how this framework can potentially alter either the sign or the magnitude of prior inferences.