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Implied Standard Deviations and Post‐earnings Announcement Volatility

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  • Daniella Acker

Abstract

This paper investigates volatility increases following annual earnings announcements. Standard deviations implied by options prices are used to show that announcements of bad news result in a lower volatility increase than those of good news, and delay the increase by a day. Reports that are difficult to interpret also delay the volatility increase. This delay is incremental to that caused by reporting bad news, although the effect of bad news on slowing down the reaction time is dominant. It is argued that the delays reflect market uncertainty about the implications of the news.

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  • Daniella Acker, 2002. "Implied Standard Deviations and Post‐earnings Announcement Volatility," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(3‐4), pages 429-456, April.
    • Handle: RePEc:bla:jbfnac:v:29:y:2002:i:3-4:p:429-456
    DOI: 10.1111/1468-5957.00437
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