Information disclosures and predictable returns: The resolution of customer momentum

I examine the role of financial disclosures in pricing anomalies when investors face attention constraints. I rely on empirical evidence of return predictability across economically linked firms and test whether financial disclosures alert investors to historical customer information. Consistent with investor inattention to firms' economic links and resolution of the inattention through financial disclosures, I find that these predictable returns concentrate around earnings announcements and analyst forecasts. My tests also suggest that some investors appear cognizant of firms' economic links. Using a difference-in-differences identification strategy, I find that investors are attentive to disclosures of new customer relationships. These findings highlight how disclosures trigger information processing by inattentive investors and facilitate the flow of historical information into prices.