Earnings guidance and market uncertainty

Jonathan L. Rogers, Douglas J. Skinner and Andrew Van Buskirk

Journal of Accounting and Economics, 2009, vol. 48, issue 1, pages 90-109

Abstract: We study the effect of disclosure on uncertainty by examining how management earnings forecasts affect stock market volatility. Using implied volatilities from exchange-traded options prices, we find that management earnings forecasts increase short-term volatility. This effect is attributable to forecasts that convey bad news, especially when firms release forecasts sporadically rather than on a routine basis. In the longer run, market uncertainty declines after earnings are announced, regardless of whether there is a preceding earnings forecast. This decline is mitigated when the firm issues a forecast that conveys negative news, implying that these forecasts are associated with increased uncertainty.

Keywords: Implied; volatility; Earnings; guidance; Management; forecasts; Uncertainty (search for similar items in EconPapers)
Date: 2009
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Persistent link: http://EconPapers.repec.org/RePEc:eee:jaecon:v:48:y:2009:i:1:p:90-109

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