Prior literature has studied firm uniqueness and its implications for capital market participants by investigating earnings uniqueness. We recognize that cost and revenue uniqueness provide separate insights about firm uniqueness because different forces drive firm‐specific revenues and costs. Cost uniqueness is of special interest because costs are opaque to investors and more complex than revenues. Therefore, we examine how cost uniqueness affects information uncertainty from the perspective of external participants. We find that idiosyncratic stock return volatility increases with cost uniqueness independently and incrementally from revenue uniqueness. We validate these results with several cross‐sectional tests that provide insights into the forces that drive the association between information uncertainty and cost uniqueness. In addition, we find that higher cost uniqueness is associated with finer cost disclosure. Overall, we show that cost uniqueness is an important dimension of cost behavior that is linked to strategic decision‐making and affects uncertainty surrounding firm valuation.

Recent work in the supply chain literature suggests that the variance in orders placed with suppliers will be larger than that of sales to buyers. This distortion in demand information increases as it is passed along the supply chain from customers to upstream suppliers and has been referred to as “the bullwhip effect.” In this paper, we argue that the bullwhip effect reduces the ability of order backlog to predict future sales and earnings for upstream suppliers. Results obtained from our empirical analysis support this proposition. We find that the impact of bullwhip on the predictive ability of order backlog is further accentuated in firms with longer operating cycles. Market intermediaries such as financial analysts, on average, are unable to fully account for differences in the predictive ability of order backlog. However, analysts belonging to employers that follow all firms in a vertical supply chain do a better job of understanding the impact of bullwhip on the predictive ability of order backlog. In additional tests, we find that the bullwhip effect also impedes the ability of inventory components to predict future sales and earnings.