The Effect of Reporting Streaks on Ex Ante Uncertainty

Management Science, Forthcoming

39 Pages Posted: 23 Dec 2015 Last revised: 20 Jun 2019

See all articles by Thaddeus Neururer

Thaddeus Neururer

University of Akron - The George W. Daverio School of Accountancy

George Papadakis

Securities and Exchange Commission (SEC)

Eddie Riedl

Boston University - Questrom School of Business

Date Written: July 27, 2018

Abstract

This paper predicts and finds that investor uncertainty surrounding a key information release event—the earnings announcement—is decreasing in a firm’s reporting streak. We use three proxies related to investor ex ante uncertainty and corresponding pricing of such uncertainty: option-implied volatilities, variance risk premiums, and expected returns; all are measured with maturities surrounding the impending quarterly earnings announcement. Consistent with prior research, we measure reporting streak as the number of consecutive quarters the firm meets or beats the consensus analyst EPS forecast. Empirical results confirm that all three uncertainty related constructs are decreasing in the length of the reporting streak. Our results suggest prior findings of valuation premiums for firms having longer reporting streaks manifest (at least in part) through a denominator effect: that is, through reduced risk for such firms.

Keywords: Uncertainty; Implied Volatilities; Variance Risk Premium; Expected Returns; Reporting Streak; Meet or Beat Analyst Forecasts

JEL Classification: G13, G14, M41

Suggested Citation

Neururer, Thaddeus and Papadakis, George and Riedl, Edward J., The Effect of Reporting Streaks on Ex Ante Uncertainty (July 27, 2018). Management Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2707594 or http://dx.doi.org/10.2139/ssrn.2707594

Thaddeus Neururer

University of Akron - The George W. Daverio School of Accountancy ( email )

United States

George Papadakis

Securities and Exchange Commission (SEC) ( email )

450 Fifth Street, NW
Washington, DC 20549-1105
United States

Edward J. Riedl (Contact Author)

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States
617-353-2317 (Phone)

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