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Option pricing of earnings announcement risks

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journal contribution
posted on 2023-06-09, 11:55 authored by Andrew Dubinsky, Michael Johannes, Andreas KaeckAndreas Kaeck, Norman J Seeger
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 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 Studies

ISSN

0893-9454

Publisher

Oxford University Press

Issue

2

Volume

32

Page range

646-687

Department affiliated with

  • Accounting and Finance Publications

Research groups affiliated with

  • Quantitative International Finance Network Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2018-02-06

First Open Access (FOA) Date

2020-05-22

First Compliant Deposit (FCD) Date

2018-02-06

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