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| Author: | Rogers, J.L. Skinner, D.J. Buskirk, A. Van |
| Title: | Earnings guidance and market uncertainty |
| Journal: | Journal of Accounting & Economics
2009 : OCT, VOL. 48:1, p. 90-109 |
| Index terms: | volatility earnings management forecasting uncertainty |
| Language: | eng |
| Abstract: | The paper examines the effect of disclosure on uncertainty by investigating how management earnings forecasts affect stock market volatility. Implied volatilities from exchange-traded options prices are used, and the results reveal that management earnings forecasts increase short-term volatility. The effect is attributable to forecasts that convey bad news, particularly when firms release forecasts occasionally rather than on a routine basis. In the longer run, when earnings are announced, market uncertainty declines regardless of whether there is a preceding earnings forecast. The decline is reduced when the firm issues a forecast that conveys negative news, implying that these forecasts are associated with increased uncertainty. |
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