Labor productivity, measured as the industry-standardized ratio of sales to number of employees, has an ability to predict average stock returns. In the portfolio sort, firms with high labor productivity earn higher expected returns than those with low productivity. The difference in returns is...

We propose that analysts are more likely to disaggregate earnings-per-share (EPS) forecasts into revenue and expense estimates when quality of firm financial reporting is low. The disaggregation happens because, compared to EPS forecast accuracy, revenue forecast accuracy is less adversely...