Accounting quality, information risk and implied volatility around earnings announcements

Seraina Anagnostopoulou and Andrianos Tsekrekos

Journal of International Financial Markets, Institutions and Money, 2015, vol. 34, issue C, 188-207

Abstract: We examine the impact of accounting quality, used as a proxy for information risk, on the behavior of equity implied volatility around quarterly earnings announcements. Using US data during 1996–2010, we observe that lower (higher) accounting quality significantly relates to higher (lower) levels of implied volatility (IV) around announcements. Worse accounting quality is further associated with a significant increase in IV before announcements, and is found to relate to a larger resolution in IV after the announcement has taken place. We interpret our findings as indicative of information risk having a significant impact on implied volatility behavior around earnings announcements.

Keywords: Accounting quality; Accruals quality; Information risk; Earnings announcements; Implied volatility; Investor uncertainty (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:34:y:2015:i:c:p:188-207

DOI: 10.1016/j.intfin.2014.10.006

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