Earnings announcement timing, uncertainty, and volatility risk premiums

Tom Adams and Thaddeus Neururer

Journal of Futures Markets, 2020, vol. 40, issue 10, 1603-1630

Abstract: We examine the relationship between firms’ quarterly earnings report timing and uncertainty before quarterly earnings announcements. Prior research provides conflicting predictions on how investor uncertainty and report timing are related. Using implied volatilities from equity options and the realized returns to straddle positions, we find evidence that uncertainty and volatility risk premiums are higher for firms that report later in the quarter. Further tests show that the increase in option premiums is unexplained by risk factors suggesting a mispricing by investors. These results are not associated with static firm‐level factors and our findings are concentrated in high growth firms.

Date: 2020
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