Journal of Accounting and Economics Vol. 48 No. 1 2009
Earnings guidance and market uncertainty
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.
- DOI
- 10.1016/j.jacceco.2009.07.001
- Volume
- 48
- Issue
- 1
- Pages
- 90-109
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref