Evolution of Market Uncertainty around Earnings Announcements

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Evolution of Market Uncertainty around Earnings Announcements

Author Info

Isakov, D.
Perignon, C.

Additional information is available for the following registered author(s):

Dusan Isakov

Abstract

This paper investigates, theoretically and empirically, the dynamic of the implied volatility (ISD) around earnings announcements dates. The volatility implied in option prices can be interpreted as the market's expected level of volatility over the remaining life of the option. In this framework the paper proposes a theoretical model of the evolution of the ISD that takes into accound two well-known features of the instantaneous volatility: volatility clustering and the leverage effect. The model indicates that the ISD should decrease after an earnings announcement except after a bad news where it should be stable or even increase. An empirical investigation is conducted on the Swiss market over the period 1989-1998.The results confirm the main implications of the theoretical model.

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Publisher Info
Paper provided by Ecole des Hautes Etudes Commerciales, Universite de Geneve- in its series Papers with number 99.12.

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Length: 21 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:fth:ehecge:99.12

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Postal: Suisse; Ecole des Hautes Etudes Commerciales, Universite de Geneve, faculte des SES. 102 Bb. Carl-Vogt CH - 1211 Geneve 4, Suisse
Web page: http://www.hec.unige.ch/
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Other versions of this item:

Article
- Isakov, Dusan & Perignon, Christophe, 2001. "Evolution of market uncertainty around earnings announcements," Journal of Banking & Finance, Elsevier, vol. 25(9), pages 1769-1788, September. [Downloadable!] (restricted)
Paper
- Isakov, D. & Perignon, C., 1999. "Evolution of Market Uncertainty around Earnings Announcements," University of Geneva Economics Working Papers 99.06, University of Geneva, Department of Political Economy.
- Dušan Isakov & Christophe Pérignon, 2000. "Evolution of Market Uncertainty around Earnings Announcements," FAME Research Paper Series rp15, International Center for Financial Asset Management and Engineering. [Downloadable!]

Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies

Cited by:
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Pascal Dumontier & Bernard Raffournier, 2002. "Accounting and capital markets: a survey of the European evidence," European Accounting Review, Taylor and Francis Journals, vol. 11(1), pages 119-151, May. [Downloadable!] (restricted)

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