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Market uncertainty and earnings guidance

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  • Agapova, Anna
  • Madura, Jeff

Abstract

We test a theory about ambiguity surrounding the distribution of fundamental values to determine how market uncertainty affects earnings guidance perception and behavior. We find a more pronounced negative share price response to negative earnings guidance and a lower likelihood that management issues negative guidance under conditions of greater market uncertainty. Yet, we also find that the share price response to positive guidance is not related to the level of market uncertainty, while the likelihood of issuing positive guidance decreases with market uncertainty. The asymmetric effects of market uncertainty on earnings guidance perception and behavior support the ambiguity based pricing theories.

Suggested Citation

  • Agapova, Anna & Madura, Jeff, 2016. "Market uncertainty and earnings guidance," The Quarterly Review of Economics and Finance, Elsevier, vol. 61(C), pages 97-111.
    • Handle: RePEc:eee:quaeco:v:61:y:2016:i:c:p:97-111
    DOI: 10.1016/j.qref.2015.12.001
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    2. Kitagawa, Norio, 2021. "Macroeconomic uncertainty and management forecast accuracy," Journal of Contemporary Accounting and Economics, Elsevier, vol. 17(3).
    3. Tuğba KAYHAN & Temur KAYHAN & Engin YARBAŞI, 2019. "Profit management in the case of financial distress and global volatile market behaviour: Evidence from Borsa Istanbul Stock Exchange," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(620), A), pages 179-192, Autumn.

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    More about this item

    Keywords

    Market uncertainty; VIX; Earnings guidance;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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