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Earnings Guidance and Market UncertaintyJonathan L. RogersUniversity of Chicago - Booth School of Business Douglas J. SkinnerThe University of Chicago - Booth School of Business Andrew Van BuskirkOhio State University (OSU) - Department of Accounting & Management Information Systems August 17, 2009 Chicago Booth Research Paper No. 09-17 Journal of Accounting & Economics (JAE), Vol. 48, No. 1, pp.90-109, 2009 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, 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.
Number of Pages in PDF File: 54 JEL Classification: D8, G14, M4 Accepted Paper SeriesDate posted: April 28, 2008 ; Last revised: September 14, 2011Suggested CitationContact Information
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