Stock Return Volatility Surrounding Management Earnings Forecasts

52 Pages Posted: 29 Mar 2011

See all articles by Andrew B. Jackson

Andrew B. Jackson

UNSW Australia Business School, School of Accounting

Date Written: March 28, 2011


The primary aim of this study is to investigate the stock return volatility surrounding management earnings forecasts. Disclosure by managers of expected earnings are particularly important communications, and as such, it is important to understand the capital market implications surrounding them. In doing so, the research questions are essentially aimed at examining the stock return volatility, first, at the release of a management earnings forecast, and second, at the eventual announcement of the realised earnings for that period. The first test investigates whether there is an increase in volatility surrounding a management earnings forecast for those firms who release them compared to a matched-firm sample of firms without a management earnings forecast at that date, and then further examines that result based on different forecast antecedents and forecast characteristics. In brief, the evidence using the Garman and Klass (1980) ‘best analytic scale-invariant estimator’ of volatility in an Australian context, between 1993 and 2003, finds that stock return volatility is greater for bad news forecasts, forecasts of low specificity, and forecasts issued by firms perceived ex ante as being of lower credibility using both permutation analysis and modelling daily volatility.

Keywords: Disclosure, Management Earnings Forecasts, Stock Return Volatility

JEL Classification: G14, M41

Suggested Citation

Jackson, Andrew B., Stock Return Volatility Surrounding Management Earnings Forecasts (March 28, 2011). Available at SSRN: or

Andrew B. Jackson (Contact Author)

UNSW Australia Business School, School of Accounting ( email )

Sydney, NSW 2052

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