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Prior research suggests that quarterly reports released concurrently with earnings depress trading due to information overload. In this study, we predict that concurrent reports help investors trade when they face uncertainty about how to interpret earnings news. We rely on the implementation of ASC 606 as a quasi-exogenous increase in uncertainty about how to trade in response to earnings news. Specifically, we find that when uncertainty is high in the first quarter of ASC 606 implementation, 10-Qs released concurrently with earnings are associated with increased trading around the earnings announcement. We find the relation is more pronounced when investors face greater uncertainty about earnings and when firms increase disclosure in their revenue recognition footnote. We also find some evidence that our results hold in a broader sample of accounting standard changes and generalize to other proxies for investor uncertainty. Our results suggest that concurrent quarterly reports are informative to investors when uncertainty about earnings is especially high. [ABSTRACT FROM AUTHOR]

This paper provides the inter-temporal capital asset pricing model with incomplete information and short sales constraints. We derive the general equilibrium market equation and the security market line of the "classical" capital asset pricing model in continuous time in the presence of incomplete information and short sales. [ABSTRACT FROM AUTHOR]

The design process involves multiple stages to provide the solution for an actual or perceived need. The process needs different information at different stages to generate the desired output, but most of the time, the information is uncertain. Information uncertainty almost always makes design decision critical. The present work aims to reduce this information uncertainty in product design by reusing previous design knowledge. Reusing an existing ontology is an obvious way to minimize information uncertainty, and consequently, it can shorten the manufacturing lead time. However, the existing techniques have a few gaps that are still unaddressed. To fill these gaps, a methodology based on bionic engineering is proposed in this work for the purpose of design reuse in product development. Here, for the representation and manipulation of the knowledge, bionic-based reasoning approach is used for the development of the new product with the help of bionic reverse engineering. The proposed methodology is validated by illustrating an example of shoe design suitable to maneuver ill-conditioned roads. This work would be useful to the design and manufacturing practitioner in product development and decision making. [ABSTRACT FROM AUTHOR]

This paper empirically investigates how firm-level information uncertainty impacts momentum profits in the Chinese Class A share market. We employ seven different factors to gauge the degree of firm-level information uncertainty—firm size, firm age, analysts’ coverage, return volatility, dispersion in analysts’ earnings forecast, trading volume, and the quality/strength of corporate governance (free float ratio). We find evidence showing that information uncertainty has an amplifying effect over the momentum profits, and the amplifying effect is more pronounced over the time periods following DOWN market state over the sample period from January 1996 to December 2013. The robustness of the empirical evidence is warranted by a risk-adjustment test based on the FF3F model and Wang and Xu’s (Financ Anal J 60(6):65-77, 2004) FF3F model, a sub-period analysis, and a different definition of market states. The empirical findings can provide an important reference point for international and domestic investors when adjusting investment strategies and portfolio positions in relatively volatile financial markets such as the Chinese stock market. [ABSTRACT FROM AUTHOR]

We provide evidence consistent with the notion that prudent use of financial derivatives improves firms' information environment. We show that firms with sophisticated and comprehensive derivatives use policies display lower levels of uncertainty about future cash flows, volatility of future income and sales growth, and equity mispricing than those that do not use derivatives. However, we also show that policies that consist of large positions in a single type of derivative contract are not likely to produce similar benefits. These results remain intact even after accounting for the endogenous nature of derivatives use policy and information risk and mispricing. [ABSTRACT FROM AUTHOR]

Using a battery of look-ahead-bias free measures of accruals quality (AQ), we find a strong and long-lasting negative relation between future returns and AQ. In decile portfolios that rank on AQ, a hedge portfolio that goes long in the lowest decile and short in the highest decile generates an annualized, risk-adjusted return of 4-12 % over 1-month to 5-year horizons, depending on the AQ measure and the portfolio weighting scheme. The return premiums associated with AQ are, (1) robust to a wide range of AQ measures, (2) robust to a battery of return-informative variables, and (3) not driven by low-priced or small stocks, earnings shocks, or the fourth-quarter effect. The documented premiums are consistent with the information uncertainty effect where firm uncertainty is negatively related to future returns . [ABSTRACT FROM AUTHOR]

This study examines a specific source of lenders' ex ante information advantage, private information about borrowers' forthcoming patents. We examine this setting to provide evidence of the impact of such private information on borrowers' cost of debt. We find evidence consistent with lenders incorporating private information by charging borrowers with forthcoming patents a lower spread than borrowers that lack that private information. We document a negative association between loan spread and the citation count on forthcoming patents, consistent with borrowers providing lenders with detailed information regarding future expected cash flows from forthcoming patents and lenders responding through a reduction in interest costs for those borrowers. We also show that the reduction in loan spreads is related to the expected value of the forthcoming patent and is greater for borrowers with higher initial information uncertainty and default risk, and when the lead lender has greater loan concentration in the borrower's industry. Our results suggest that forthcoming patents are a significant source of private information useful to borrowers and employed by lenders. [ABSTRACT FROM AUTHOR]

This study examines the differential predictive power of past earnings volatility for analyst forecast errors and future returns. Past earnings volatility jointly captures two correlated, but distinct, earnings properties: time-series earnings variation and uncertainty in future earnings. To distinguish between these two earnings properties, we develop a forward-looking measure of earnings uncertainty that has a minimal mechanical link to variation in prior-period earnings realizations and does not rely on analyst forecasts. Our results suggest that future earnings uncertainty, and not time variation in earnings, is associated with overly optimistic future earnings expectations of equity analysts and investors. We provide the first empirical evidence on the relevance of future earnings uncertainty to analysts and investors over 1-year horizons. In addition, we provide empirical evidence showing that forecast dispersion is a poor measure of earnings uncertainty. [ABSTRACT FROM AUTHOR]

A large body of literature demonstrates that acquisitions are on average value destroying for the acquirer. We investigate whether the change in the acquirer's information uncertainty contributes to acquirer wealth losses. Information uncertainty affects the discount rate (the cost of capital), which in turn influences stock price. Our results indicate that acquisitions lead to increases in information uncertainty, as proxied by analysts' earnings forecast dispersion. We also find that the change in information uncertainty is negatively related to acquirer long-term stock performance, after controlling for the acquirer's fundamentals. Taken together, this evidence is consistent with the conclusion that increases in information uncertainty resulting from acquisitions contribute to acquirer post-acquisition wealth losses [ABSTRACT FROM AUTHOR]

Mean-variance criterion has long been the main stream approach in the optimal portfolio theory. The investors try to balance the risk and the return on their portfolio. In this paper, the deviation of the asset return from the investor's expectation in the worst scenario is used as the measure of risk for portfolio selection. One important advantage of this approach is that the investors can base on their own knowledge, information, and preference on various risks, in addition to the asset's volatility, to adjust their exposure to various risks. It also pinpoints one main concern of the investors when they invest, the amount they lose in the worst situation. [ABSTRACT FROM AUTHOR]

This paper presents the results from a minimum-effort game in which individuals can observe the choices of others in real time. We find that under perfect monitoring almost all groups coordinate at the payoff-dominant equilibrium. However, when individuals can only observe the actions of their immediate neighbors in a circle network, monitoring improves neither coordination nor efficiency relative to a baseline treatment without real-time monitoring. We argue that the inefficacy of imperfect monitoring is due to information uncertainty, that is, uncertainty about the correct interpretation of a neighbor's actions. Information uncertainty prevents individuals from inferring safely that their group has managed to coordinate from the available information. [ABSTRACT FROM AUTHOR]

There exist two classes of problems, which need the use of a multicriteria approach: problems whose solution consequences cannot be estimated with a single criterion and problems that, initially, may require a single criterion or several criteria, but their unique solutions are unachievable, due to decision uncertainty regions, which can be contracted using additional criteria. According to this, two classes of models (〈 X, M〉 and 〈 X, R〉 models) can be constructed. Analysis of 〈 X, M〉 and 〈 X, R〉 models (based on applying the Bellman-Zadeh approach to decision making in a fuzzy environment and using fuzzy preference modeling techniques, respectively) serves as parts of a general scheme for multicriteria decision making under information uncertainty. This scheme is also associated with a generalization of the classic approach to considering the uncertainty of information (based on analyzing payoff matrices constructed for different combinations of solution alternatives and states of nature) in monocriteria decision making to multicriteria problems. The paper results are of a universal character and are illustrated by an example. [ABSTRACT FROM AUTHOR]

This study examines the role of information uncertainty (IU) in predicting cross-sectional stock returns. We define IU in terms of “value ambiguity,” or the precision with which firm value can be estimated by knowledgeable investors at reasonable cost. Using several different proxies for IU, we show that (1) on average, high-IU firms earn lower future returns (the “mean” effect), and (2) price and earnings momentum effects are much stronger among high-IU firms (the “interaction” effect). These findings are consistent with analytical models in which high IU exacerbates investor overconfidence and limits rational arbitrage. [ABSTRACT FROM AUTHOR]