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Earnings Guidance and Market Uncertainty

Chicago Booth Research Paper No. 09-17
2009
  • 48
    Citations
  • 6,442
    Usage
  • 4
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    48
    • Citation Indexes
      48
  • Usage
    6,442
    • Abstract Views
      5,471
    • Downloads
      971
  • Captures
    4
    • Readers
      3
      • SSRN
        3
    • Exports-Saves
      1
      • SSRN
        1
  • Ratings
    • Download Rank
      47,977

Paper Description

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, on average, increase short-term volatility. This effect is attributable to forecasts that convey bad news, especially when firms release forecasts sporadically (as opposed to 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.

Bibliographic Details

Jonathan L. Rogers; Douglas J. Skinner; Andrew Van Buskirk

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