Estimating the Precision of Information on Earnings and Non-earnings Announcement Days,and Its Relation with the Cost of Equity

ABSTRACT

Using daily stock returns, we estimate the precision of information during earnings and non-earnings announcement days, and find that although the precision of information in daily stock returns increases during earnings announcement days, it explains less of the variation in expected returns than the precision of information on non-earnings announcement days. Our findings suggest that the precision of earnings disclosures has a small effect on the cost of equity relative to the precision of information on other days of the year.