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Earnings guidance and market uncertainty

  • Rogers, Jonathan L.
  • Skinner, Douglas J.
  • Van Buskirk, Andrew
Registered author(s):

    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.

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    File URL: http://www.sciencedirect.com/science/article/B6V87-4WV15JP-1/2/60874a868a4545e3c3749a8b189579c8
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    Article provided by Elsevier in its journal Journal of Accounting and Economics.

    Volume (Year): 48 (2009)
    Issue (Month): 1 (October)
    Pages: 90-109

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    Handle: RePEc:eee:jaecon:v:48:y:2009:i:1:p:90-109
    Contact details of provider: Web page: http://www.elsevier.com/locate/jae

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