Earnings_RFS.pdf (1.36 MB)
Option pricing of earnings announcement risks
journal contribution
posted on 2023-06-09, 11:55 authored by Andrew Dubinsky, Michael Johannes, Andreas KaeckAndreas Kaeck, Norman J SeegerThis 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 regarding 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.
History
Publication status
- Published
File Version
- Accepted version
Journal
Review of Financial StudiesISSN
0893-9454Publisher
Oxford University PressExternal DOI
Issue
2Volume
32Page range
646-687Department affiliated with
- Accounting and Finance Publications
Research groups affiliated with
- Quantitative International Finance Network Publications
Full text available
- Yes
Peer reviewed?
- Yes