Download This PaperUncertainty and the Earnings Announcement Premium
Journal of Money, Credit and Banking, accepted
47 Pages Posted: 24 Jul 2019 Last revised: 10 Oct 2025
Date Written: September 15, 2025
Abstract
This paper introduces the earnings announcement premium (EAP) as a measure of firm-level uncertainty. We find that EAP, the abnormal return around earnings announcements, is higher for firms with greater analyst forecast dispersion, political risk, and smaller size, all of which are commonly associated with higher uncertainty. Moreover, EAP negatively predicts future investment, indicating that firms reduce investment in response to heightened uncertainty. These findings suggest that EAP serves as a market-based proxy for firm-specific uncertainty, influencing not only corporate behavior and investment strategies but also financial policies and risk management practices. Overall, the paper sheds light on how uncertainty shapes market dynamics and corporate decision-making.
Keywords: Ambiguity Aversion, Earnings Announcements, Investment
JEL Classification: D81, G14, G31
Suggested Citation: Suggested Citation