August 29, 2019
We examine whether management guidance contains complementary information that helps resolve investor uncertainty around macroeconomic announcements. We find that when firms issue a management earnings forecast in the month prior to a Federal Open Market Committee (FOMC) announcement of the Federal funds rate target, they experience a significantly larger decrease in implied volatility around the announcement. This effect is more pronounced for firms that are more financially constrained and for firms that have greater investment opportunities, consistent with guidance having greater information complementarities when firm investment is more sensitive to interest rate news.