Musings on Markets is the personal blog of Aswath Damodaran, professor of finance at NYU Stern and widely known as the "Dean of Valuation." Running since 2008, it publishes hands-on intrinsic-value teardowns of headline companies (SpaceX, Tesla, Nvidia) using his narrative-and-numbers DCF framework, plus periodic market-wide reviews.
This article looks at two proposals: the SEC's idea to make companies report every six months instead of every quarter, and the new Federal Reserve chair's plan to give less market guidance. The author, a valuation expert, argues quarterly reports should stay but be shorter—most useful data sits in the financial statements and footnotes, not in long risk discussions or management forecasts. Ordinary investors should know that beating earnings estimates doesn't always lift a stock, and the Fed often follows markets rather than leads them. Worth reading to avoid overreacting to headlines and focus on information that actually matters.
The author's core judgment this issue: quarterly reports should be "retained but slimmed down," and the Fed should "guide less and appear less"—the market can price itself without Fed guidance. Overall stance: neutral, leaning toward market mechanisms. [Neutral]
The author (valuation scholar Aswath Damodaran) sees the SEC's proposal to change listed companies' quarterly reports to semiannual reports and new Fed Chair Kevin Warsh's stance favoring less policy guidance to financial markets as structurally analogous events: both withdraw the "news" that markets have grown accustomed to using to calibrate prices, and the arguments for and against are mirror images. The author first explains his academic origins: his doctoral dissertation, completed in 1984, studied precisely how the frequency and delay of information releases affect stock price volatility, skewness, and jumps (skew and jumps), and so these two news items remind him of his earlier work. The two share two commonalities: First, whether eliminating quarterly reports or reducing Fed guidance, both remove the "news" that markets have become accustomed to receiving and using to calibrate prices. Second, the arguments on both sides are highly parallel—proponents of eliminating quarterly reports say quarterly reports foster market myopia and intensify short-termism; proponents of reducing Fed guidance argue that guidance creates a game between traders and investors, keeping people focused on FOMC moves while ignoring fundamentals; opponents, meanwhile, say that withholding quarterly reports and Fed guidance is equivalent to taking away information used in market pricing, making prices more volatile and less informative.
The author explicitly declines to take sides, saying in his original words: "there is both truth and hyperbole on both sides, and I will try to thread the needle." That is: "Both sides contain genuine elements and exaggerated distortions, and I will try to chart a path between them." He jokes that he is a "lapsed academic" who has not submitted a paper in decades. The entire article maintains a third-party, weighing tone—readers should note that he is a valuation scholar with a natural academic interest in how information enters prices, which is the underlying backdrop of this series of analyses.
U.S. quarterly reporting is a spontaneous product driven by the self-interest of exchanges and companies—when there was no statutory requirement in 1931, more than 60% of listed companies already voluntarily disclosed quarterly; elsewhere in the world, the past two decades have mostly seen a cycle of "introduction—withdrawal." The statutory timeline in the U.S.: the Securities Exchange Act of 1934 established the SEC and required only annual reports (10-K); this was changed to semiannual reports in 1955; and only in 1970 was it changed to quarterly reports, to be disclosed within 45 days of quarter-end. But before regulation stepped in, the NYSE had required quarterly reports for most companies as early as 1939; companies also realized that more frequent, more transparent financial reports could attract investors, and by 1931 more than 60% of companies were already reporting quarterly voluntarily. The rest of the world was much slower, and experienced multiple reversals:
| Region | Quarterly Reporting Introduced | Withdrawal/Shift |
|---|---|---|
| United Kingdom | Mandatory quarterly reporting in 2007 | Reverted to semiannual reporting in 2014 |
| European Union | Introduced in 2007 | Withdrew in 2013 |
| Singapore | Required quarterly reporting in 2003 for companies with market capitalization above S$20m | In 2020, retained the requirement only for a few companies with financial and regulatory problems |
| Japan | Introduced in 2003 | Abolished in 2024 |
Emerging markets also vary widely: India's listed companies are required to disclose quarterly, as are many companies in Brazil and China; Nigeria requires quarterly reports; South Africa mandates semiannual reports, but many companies voluntarily report quarterly; most of the rest of Africa maintains semiannual requirements.
The author concludes: the early-21st-century expectation that "the world would follow the U.S. mandatory quarterly reporting model" has fallen flat—many regions experimented with mandatory quarterly reports and then abandoned them, reverting to semiannual reports. It should be added, however, that even without a mandate, a considerable proportion of companies voluntarily disclose quarterly, though the depth of disclosure varies.
The debate focuses on "how often to report" but misses the expansion of the reports' content itself: the typical U.S. quarterly report grew from 2,000–5,000 words in 1980 to three or four times that by the early 2000s, and the trend has not stopped. The author uses a chart to show the word-count growth of median financial reports among Russell 3000 companies (quarterly reports tracked 2006–2020, annual reports tracked 1994–2020), and attributes it to four factors:
The author calls the phenomenon of ever-thickening earnings reports "disclosure diarrhea," arguing that more disclosure can mean less information. He breaks the game around quarterly reports into a fixed sequence — "forecast—revise—surprise—drift" — and notes that two new variables worth heeding have emerged at this stage.
The earnings game starts with analysts and investors forecasting the next report: almost always an EPS estimate, and for high-attention companies often operating metrics such as revenue and margins as well. Sell-side forecasts become semi-public information, aggregated by financial data services into "consensus estimates." Firms such as Zacks have been doing this aggregation for decades; today, that same information is available directly from Google Finance and Yahoo! Finance — the author notes that on July 27, 2026, the Yahoo! Finance page already showed market earnings forecasts for Apple's September 2026 report, while Zacks continuously tracks how analysts are revising their Apple forecasts. As the report date approaches, analysts keep revising expectations. On release day, actual EPS is compared with expectations: a beat is a "positive surprise," a miss a "negative surprise," and the stock typically moves in the same direction. An older chart the author cites shows the market's price reaction to earnings surprises arrayed in ten buckets from most positive to most negative; he also notes evidence that, because forecasts and revisions are publicly visible, the market's reaction to earnings has grown more muted over time. In the days after a report, price drift becomes a trading signal: positive surprises tend to be followed by upward drift, negative surprises by downward drift. The drift is modest in size, but in active trading, "winning an inch is still winning."
The first new variable is on the company side: "earnings management." Companies have learned to exploit the flexibility built into accounting standards to get past analyst expectations — technology companies especially. The result was a disproportionately high number of positive earnings surprises among S&P 500 constituents in the second quarter of 2026 (data from Factset, broken out by sector). The second new variable is on the market side: "whispered earnings." When companies beat expectations as a matter of routine, the market recalibrates; investors expect a company that has historically beaten by 5% or 10% to keep doing so, and a delivered number below that implied level is treated as negative. The author cites second-quarter 2026 data: the link between earnings surprises and stock-price reactions was weak, and a meaningful share of positive surprises instead came with falling share prices.
The author argues that the debate over whether to keep quarterly reports is, at bottom, a dispute over how time and energy in the "earnings game" should be allocated; he further cautions that reducing reporting frequency would give insiders with non-public information more room to profit, deepening the sense that the market is unfair.
On whether the U.S. should move from quarterly to semi-annual reporting, the author boils the debate down to one question: whether the time and energy investors and companies spend on the "earnings game" is worth it — and where that time and energy would flow if quarterly reports disappeared.
| Camp | View of quarterly reports and the earnings game |
|---|---|
| Favor reducing reporting frequency | The earnings game fixates on next quarter's EPS and whether it beats expectations, fuels short-termism, and distracts from fundamentals |
| Favor keeping quarterly reports | Dropping quarterly reports would only push the same game, more intensely, into semi-annual reports; even with "cooking the books" concerns, long-term investors still benefit from quarterly reports |
The author adds a dimension often overlooked: even under legal constraints, insiders inside and outside companies still trade on material information they hold that the public does not. Dropping quarterly reports would give them more room to profit at the expense of public-market investors. Insider trading may make prices more information-rich, but it also reinforces the feeling that "financial markets are an unfair game."
Speaking as an investor, the author proposes a compromise: keep the quarterly cadence, but cut the lengthy sections such as risk narratives and management guidance, retaining only the financial data and footnotes. He also rebuts the "short-termism" argument, holding that the liquidity short-term traders provide has value for everyone.
The author describes himself as "an investor" and believes there is a compromise path that serves both sides. He supports keeping quarterly reports for two reasons. First, quarterly reports contain the information needed to update company valuations — although for most companies, a single quarterly report has only a small marginal effect on value. Second, he has no interest in playing the earnings game, but the price corrections around earnings releases are genuinely useful: for companies he holds, the price correction acts as a catalyst, pushing down the stocks of overvalued companies and lifting those of undervalued ones. At the same time, the useful information he finds in earnings reports comes almost entirely from the financial statements and footnotes, not from lengthy risk-exposure discussions or management guidance — so he would welcome deleting those sections and making reports thinner.
Notably, the author does not use "short-termism" as a reason to keep quarterly reports — and deliberately so. He has little regard for the label itself, answering with a touch of irony: "any market movement away from your preferred price direction is short term, and any movement in your favor is indicative of market wisdom." His meaning: whenever a price move runs against your wishes, it is "market short-termism"; whenever it runs in your favor, it is "market wisdom." He believes the overwhelming majority of market participants — in any era, in any market — trade in order to make money in the short run, and regulators or rule-makers cannot change that dynamic. More importantly, the "magic of markets" the author believes in is that "millions of trades motivated by opportunism and the short term can still yield a price that is long term and rational." If investors all became long-term buyers driven only by fundamentals, market liquidity would fall and trading costs would rise; short-term traders in effect provide a market service and liquidity that everyone — long-term investors included — enjoys.
On the regulatory path, the author hopes the SEC will keep the quarterly-report requirement while compressing total disclosure; but even if the SEC decided to switch to semi-annual reporting, it would not materially change his approach. What he would miss more is quarterly updates from young, high-growth companies — whose revenue, margins, and other operating metrics change quickly in the short term — though he suspects many such companies would voluntarily carry on the quarterly tradition.
The author argues that investors who entered the market after 2008 credit the Fed with the low-rate era and blame the Fed for the high rates since 2022 — a view that is not only wrong but unhealthy for investors.
The author observes that for most investors who began investing after 2008, the Fed — and central banks more broadly — looms extremely large in the investment process. Many people attribute the low rates after 2008 almost entirely to Fed actions, and then go on to blame the Fed for the high rates since 2022. The author has long argued that this view is not only incorrect but — whether the Fed is cast as a savior or a villain — unhealthy for investors.
The author's actionable conclusions: if the SEC moves to semi-annual reporting, high-growth companies will most likely voluntarily keep reporting, so the key information would not necessarily disappear; investors reading earnings reports should focus on the financial statements and footnotes, not management narrative; and for the rate environment, they should avoid "savior or villain" attributions to the Fed.
The author draws on personal experience to show that the market's obsession with the Fed is a product of the post-2008 crisis era; before that, the Fed deliberately gave no explicit rate guidance. When the author entered the stock market in the 1980s, Paul Volcker was playing a central role in curbing inflation as Fed chair; the author admits he was "perhaps ignorant" at the time, but he genuinely could not name a single member of the FOMC (Federal Open Market Committee), nor did he know when they met. Changes in the federal funds rate did filter through to the market, but in his memory they were not the core of stock market volatility. Alan Greenspan enjoyed rock-star status in the late 1990s, but the market paid more attention to his remarks about investors' "irrational exuberance"; at the time, the FOMC met eight times a year, and although its minutes and actions were public, it deliberately offered no explicit guidance on the direction of rates, releasing only subtle hints.
The author believes the "sea change" occurred during the 2008 market crisis: the Fed introduced explicit guidance for the first time, stating that rates would remain low "for some time," and this practice largely continued through the tenures of Bernanke (2006-2014), Yellen (2014-2020), and Powell (2020-2026). Since then, the Fed's status in the market has changed—both bond and equity investors now regard it as the arbiter of interest rates and the helmsman of the economy.
The author uses data from January 1962 to June 2026 to argue that changes in the federal funds rate are more like a "mirror," reflecting rate changes that have already occurred, rather than signaling the future. The article first lays out the Fed's functions: through 12 regional reserve banks covering the entire United States, it gathers information from every layer of the economy—from the price pressures facing consumers and producers to the pace of economic growth—giving it a data perspective broader than that of any government agency. The FOMC, composed of all members of the Board of Governors and representatives of the regional reserve bank presidents, is responsible for determining open market operations, the size of the balance sheet, and the federal funds rate (the rate on overnight interbank reserve lending), and for providing policy direction on inflation and the economy; the Fed chair testifies before Congress every six months. The federal funds rate attracts attention for two reasons: first, as a signal, it reflects what the Fed sees in the economic data; second, there are rates directly tied to it—the prime rate, as well as some credit card and certificate of deposit (CD) rates, move in tandem with it.
But the author argues that the Fed's ability to influence interest rates is far more limited than most people believe, for two reasons. First, although the federal funds rate and market short-term rates (such as U.S. Treasury bill rates) are positively correlated, the evidence leans toward the latter leading the former—the federal funds rate tends to be raised or lowered only after short-term Treasury rates have moved up or down, as if the Fed were imitating the market. Second, the relationship between the federal funds rate and longer-term market rates (the rates that truly drive asset valuations and matter more to borrowers) is even weaker. The author divides the data by quarter into three groups—"cuts, hikes, unchanged"—with the following conclusions:
| Observation dimension | Short-term rates (3-month U.S. Treasuries) | Long-term rates (10-year U.S. Treasuries) |
|---|---|---|
| Co-movement with Fed Funds changes | Relatively strong | Weaker |
| Timing of changes | Mostly before or in the same quarter as Fed Funds changes | Same as above |
| Spillover after Fed Funds changes | Only slight spillover | Almost no spillover |
Accordingly, the author's original words are: "changes in fed funds rate are less signals of future movements in interest rates and more reflectors of changes that have already happened"—meaning: "Changes in the federal funds rate are less a signal of where interest rates are headed and more a reflection of changes that have already taken place." (The chart data in the article can be downloaded, with the second chart's data from FRED.)
The author acknowledges there have been periods when the Fed influenced the real economy, but statistically the correlation between Fed Funds changes and GDP growth is weak, and the "conventional wisdom" lacks support. The most typical counterexample is 1981, when Paul Volcker raised the federal funds rate to 20%, triggering a deep recession—a moment the author explicitly concedes as one of "Fed action producing substantive impact." But after examining real GDP growth in the quarter before a Fed Funds change, the quarter of the change, and the quarter after, the author finds that the conventional view—"hikes lead to slowing growth or even recession, and cuts foreshadow faster growth"—has almost no data to support it. The author's original words are: "the fed effect on the real economy has been more 'meh' than 'wow'"—meaning: "The Fed's impact on the real economy has been more 'bland' than 'stunning.'" ("meh" is colloquial for "so-so," and "wow" means "stunning.")
The author argues that the gap between the market's perception of the Fed's power and its actual power is "not only wide, but dangerous," and notes that Kevin Warsh has been saddled by politicians with rate-cut expectations that cannot be fulfilled. The danger at the policy level lies in "perverse action": in the face of high inflation, the central bank may be pressured to lower the rates it controls (such as the federal funds rate), which would instead make future inflation higher. The danger at the investment and business level is that fixating on what the Fed is doing and will do leads investors to overlook the fundamentals that ultimately drive rates and growth—especially inflation. Using the 10-year U.S. Treasury yield as a proxy for the long-term rate, the author shows that most of the variation in long-term rates can be explained by inflation and real economic growth, not by the Fed's actions or inaction.
Every Fed chair must contend with the dilemma of being "treated as all-powerful," but the author believes Kevin Warsh is more exposed to it than any predecessor: politicians from both parties seem to believe Warsh could push mortgage and Treasury rates down to 2% or even lower if he were willing; but with inflation expectations running at 2.5-3%, this is "absolutely impossible." The way out is long and fraught with resistance, but the destination should be a world in which "the Fed is seen and heard less." The author believes that reducing or withdrawing forward guidance would be a good first step; afterward, the Fed and Warsh still need to show more humility about the boundaries of their power and honestly acknowledge the extent to which it follows the market rather than leads it. Taking the FOMC's decision on July 29, 2026, to hold rates unchanged as an example, the subtext the author reads is: although inflation is higher than desired (3% or higher, against a 2% target), a large part of it is driven by the war and its impact on oil prices.
Actionable implication: shift attention away from the Fed's every statement and back to inflation and real growth; the pricing anchor for long-term rates is fundamentals, not Fed actions. The author's chain of evidence implies that changes in the federal funds rate have almost no spillover to long-term rates, and it is long-term rates that determine asset valuations and borrower costs—so the chain of "Fed cuts → valuations rise" is not robust; inflation expectations of 2.5-3% also mean mortgage and Treasury rates will be very hard to push below 2%, and pricing for rate-sensitive assets should not bet on the "Warsh cuts" narrative. Author's perspective bias: this is the author's analytical judgment based on a self-selected data window and an explicit policy stance ("let the Fed be seen less"), and it carries personal color; readers should treat it as one view rather than market consensus.
The author explicitly rejects the concern that markets will be lost without Fed guidance, arguing that before the guidance era, markets priced themselves and performed well. The author's original words: "There will be some who feel that markets will be lost without Fed guidance, but I don't think so." — meaning, "Some may think that without the Fed's guidance, the market will lose its bearings, but I don't think so." He recalls that before the guidance era, financial markets set interest rates and stock prices themselves, and did a "pretty good job."
The author further criticizes that the surge in Fed guidance has instead made market participants abandon their own responsibilities. His judgment is that the abundance of guidance has led many to stop closely monitoring fundamentals and stop judging for themselves what interest rates should be—outsourcing pricing responsibility to the central bank.
The author's overall conclusion is that "more disclosure is not inherently good," and there is a tipping point for information overload. The author's original words: "there is nothing inherently good about having more disclosure" — meaning, "more disclosure has no inherent benefit in essence." He adds that there is a tipping point beyond which information overload causes investors to behave in perverse ways.
He thus takes a middle position different from both sides of the debate. In the dispute between quarterly and semi-annual reporting, he considers himself "less of an absolutist": rather than reducing reporting frequency, the SEC should "slim down" reports—replacing one-size-fits-all disclosure requirements with targeted disclosures, and focusing reports on "what has happened" rather than forecasting the future.
The author's prescription for the Fed is "less is more": less guidance, fewer statements, less attention. Specifically, there are three points: the Fed should reduce guidance on future actions, FOMC members should reduce their opinions on rates and the economy, and markets should pay less attention to FOMC meetings and their "smoke signals." He believes markets will proactively fill this vacuum, which is good for both investors and the Fed—because the Fed's own decisions can also draw information from these market judgments.
| Data Set | Frequency | Range |
|---|---|---|
| Fed funds rate and U.S. Treasury yields | Monthly | 1962-2026 |
| Fed funds rate and real GDP growth | Quarterly | 1962-2026 |
| Intrinsic risk-free rate and 10-year Treasury | — | 1954-2025 |
| Subject | Direction | Author's Stance in One Sentence | Key Data |
|---|---|---|---|
| Federal Reserve (Fed/FOMC) | Not specified | Should reduce guidance and public statements, letting the market fill in the blanks; treating the Fed as either a savior or a villain is unhealthy | Data from 1962–2026 show that Fed Funds had almost no spillover to the 10-year Treasury; the 1981 Volcker hike to 20% was a rare case of substantive impact |
| Federal Funds Rate (Fed Funds) | Not specified | Is a "mirror" rather than a signal, reflecting rate changes that have already occurred | Correlates closely with short-term rates; most moves occur after or in the same quarter as shifts in short-term Treasury yields |
| Kevin Warsh (next Fed chair) | Not specified | Politicians from both parties place expectations on him for rate cuts that are impossible to achieve, making his position more difficult than any predecessor's | With inflation expectations at 2.5–3%, pushing mortgage/Treasury rates below 2% is "absolutely impossible" |
| SEC (U.S. Securities and Exchange Commission) | Not specified | Should keep quarterly reports but reduce overall disclosure volume, replacing one-size-fits-all with targeted disclosure | Quarterly reporting was not made a statutory requirement until 1970; as early as 1931, over 60% of companies voluntarily reported quarterly |
| U.S. Treasuries (3-month/10-year) | Not specified | Long-term rates are determined mainly by inflation and real growth, not Fed actions; the 10-year is the anchor for asset valuations | After Fed Funds moves, there is almost no spillover to the 10-year and only slight spillover to the 3-month |
| Apple | Hold / observe | Mentioned as an example of the earnings game; its earnings estimates are publicly visible to the market | September 2026 earnings forecasts already visible on Yahoo! Finance (as of 2026-07-27) |
| S&P 500 | Hold / observe | The proportion of positive surprises in 2026Q2 was unusually high, but the correlation with stock price reactions was weak | Factset data: a substantial portion of positive surprises were accompanied by stock price declines |
| Russell 3000 | Hold / observe | Uses the increase in median report word count to illustrate disclosure bloat | Annual report data 1994–2020; quarterly report data 2006–2020 |
| Earnings data platforms (Zacks/Google Finance/Yahoo! Finance) | Not specified | Consensus estimates have become quasi-public information, directly accessible to investors | Zacks has tracked analysts' revisions to Apple forecasts for decades |
| Factset | Not specified | The author cites its data to show the decoupling of earnings surprises from stock price reactions | 2026 Q2 S&P 500 positive surprises split by industry |
| NYSE (New York Stock Exchange) | Not specified | Required most companies to report quarterly well before regulators did | In 1939, it required most companies to report quarterly |
| Paul Volcker (former Fed chair) | Not specified | The author acknowledges his tenure was a rare example of the Fed having substantive impact on the real economy | In 1981, he raised the federal funds rate to 20%, triggering a deep recession |
| Alan Greenspan (former Fed chair) | Not specified | Had rock-star status in the late 1990s, but the Fed at the time deliberately avoided giving explicit guidance | The FOMC met 8 times a year, offering only subtle hints |
| Bernanke/Yellen/Powell (successive Fed chairs) | Not specified | After 2008, they continued the era of "explicit guidance" | Served 2006–2014, 2014–2020, and 2020–2026 respectively |
| Prime rate and linked rates | Not specified | Directly linked to Fed Funds, they are the market rates most affected | Some credit card and certificate of deposit (CD) rates move in tandem with Fed Funds |
| FRED (data source) | Not specified | A data tool the author uses to support the "mirror" judgment about Fed Funds | Data for the second chart comes from FRED |