Abstract
This paper uses option prices to learn about the equity price uncertainty surrounding information released on earnings announcement dates. To do this, we introduce reduced-form models and estimators to separate price uncertainty about earnings announcements from normal day-to-day volatility. Empirically, we find strong support for the importance of earnings announcements. We find that the anticipated price uncertainty is quantitatively large, varies across time, and is informative about the future return volatility. Finally, we quantify the impact of earnings announcements on formal option pricing models.
| Original language | English |
|---|---|
| Pages (from-to) | 646-687 |
| Number of pages | 42 |
| Journal | The Review of Financial Studies |
| Volume | 32 |
| Issue number | 2 |
| Early online date | 22 May 2018 |
| DOIs | |
| Publication status | Published - Feb 2019 |
Keywords
- Earnings announcements
- anticipated uncertainty
- equity options
- implied volatility
