Earnings Uncertainty and Attention

Abstract

This paper explores the relationship between earnings uncertainty and attention to firm-specific information. I use the percentage of uncertain words in 10-K or 10-Q filings as the primary measure of ex ante earnings uncertainty. I find that, the earnings releases of high uncertainty firms are accompanied by higher Google search volume, higher Bloomberg readership, higher abnormal trading volume, and faster analyst response. Furthermore, I find evidence of larger underreaction of prices to earnings surprises in low uncertainty firms suggesting that attention constraints play a role. The findings are consistent with attention constrained investors allocating more attention to high uncertainty firms.