The Relation between Investor Uncertainty and Market Reactions to Earnings Announcements: Evidence from the Property-Casualty Insurance Industry in the USA

29 Pages Posted: 6 Feb 2005

See all articles by Theodore E. Christensen

Theodore E. Christensen

University of Georgia - J.M. Tull School of Accounting; University of Georgia

Jennifer J. Gaver

University of Georgia - J. M. Tull School of Accounting, Terry College of Business

Pamela S. Stuerke

University of Rhode Island - College of Business

Abstract

This paper investigates the relationship between investor uncertainty, gauged by properties of analysts' forecasts, and the stock market response to earnings. We find that uncertainty is best characterized by a comprehensive measure recently proposed by Barron, Kim, Lim and Stevens (1998), BKLS. The BKLS measure is related to uncertainty-inducing events, as well as factors that affect the difficulty faced by analysts in forecasting earnings. We conclude that, first, pre-disclosure uncertainty is a significant determinant of the price reaction to the earnings release, and second, BKLS is a more comprehensive measure of uncertainty than simple dispersion.

Suggested Citation

Christensen, Theodore E. and Gaver, Jennifer J. and Stuerke, Pamela S., The Relation between Investor Uncertainty and Market Reactions to Earnings Announcements: Evidence from the Property-Casualty Insurance Industry in the USA. Available at SSRN: https://ssrn.com/abstract=661982

Theodore E. Christensen (Contact Author)

University of Georgia - J.M. Tull School of Accounting ( email )

Athens, GA 30602
United States

University of Georgia ( email )

Athens, GA
United States

Jennifer J. Gaver

University of Georgia - J. M. Tull School of Accounting, Terry College of Business ( email )

233 Brooks Hall
Athens, GA 30602-6252
United States
706-542-3699 (Phone)
706-542-3630 (Fax)

Pamela S. Stuerke

University of Rhode Island - College of Business ( email )

Kingston, RI 02881
United States

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