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Earnings guidance and market uncertainty

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  • Rogers, Jonathan L.
  • Skinner, Douglas J.
  • Van Buskirk, Andrew

Abstract

We study the effect of disclosure on uncertainty by examining how management earnings forecasts affect stock market volatility. Using implied volatilities from exchange-traded options prices, we find that management earnings forecasts increase short-term volatility. This effect is attributable to forecasts that convey bad news, especially when firms release forecasts sporadically rather than on a routine basis. In the longer run, market uncertainty declines after earnings are announced, regardless of whether there is a preceding earnings forecast. This decline is mitigated when the firm issues a forecast that conveys negative news, implying that these forecasts are associated with increased uncertainty.

Suggested Citation

  • Rogers, Jonathan L. & Skinner, Douglas J. & Van Buskirk, Andrew, 2009. "Earnings guidance and market uncertainty," Journal of Accounting and Economics, Elsevier, vol. 48(1), pages 90-109, October.
    • Handle: RePEc:eee:jaecon:v:48:y:2009:i:1:p:90-109
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    References listed on IDEAS

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