The price of firm-level information uncertainty.

• We construct a new measure of firm-level information uncertainty. • In aggregate, our uncertainty measure comoves with other uncertainty measures. • This measure positively predicts future stock returns. • This measure primarily captures the idiosyncratic component in the cross-section. Firm-level uncertainty is difficult to measure in nature. We construct a new measure of firm-level information uncertainty based on uncertainty premium implied by earnings announcement returns. This new measure fundamentally differs from other firm-level uncertainty measures. We find that high-uncertainty firms outperform low-uncertainty firms by 9.59 % per annum on a risk-adjusted basis. Furthermore, this return predictability persists for up to five quarters. Our uncertainty measure and its return predictability are primarily driven by the idiosyncratic component. Overall, our results support the existence of an uncertainty premium and cast doubt on the hedgeability of uncertainty. [ABSTRACT FROM AUTHOR]