Download or read book Uncertainty and Expectation Revisions after Earnings Announcements written by P. Eric Yeung and published by . This book was released on 2008 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bayesian theory predicts an increase in market participants' reliance on reported current earnings to revise their expectations of future earnings when the uncertainty in future earnings is higher. Prior studies focus on price reactions and find negative associations between measures of earnings uncertainty and investors' reliance on reported current earnings. This study examines analysts' forecast revisions (of future earnings) around the announcements of current period earnings and finds positive associations between measures of earnings uncertainty and analysts' reliance on reported current earnings. The findings suggest that uncertainty measures and discount rates are correlated, and cross-sectional differences in the discount rate taint the interpretation of price reactions as evidence of expectation revisions under uncertainty. This study sheds additional light on the complex relationships among earnings uncertainty measures, price reactions to earnings surprise, and cost of capital.

Download or read book Investor Uncertainty and the Earnings return Relation written by Kenneth Reichelt and published by . This book was released on 2005 with total page 134 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Does Analyst Forecast Dispersion Represent Investors Perceived Uncertainty Toward Earnings written by and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Is Information Uncertainty Positively Or Negatively Associated with Post earnings announcement Drift written by Joonho Lee and published by . This book was released on 2007 with total page 164 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation reconciles ostensibly conflicting evidence from prior research about the association between information uncertainty and post-earnings-announcement drift (PEAD). According to traditional PEAD studies there should be a positive association between PEAD and uncertainty about the implication of an earnings announcement for future earnings, referred to in this dissertation as "information uncertainty." Empirical studies have documented both positive and negative associations, however. In particular, studies that use analyst forecast dispersion as a proxy for information uncertainty report a negative association between information uncertainty and PEAD. Although the authors of those studies argue that their results are consistent with behavioral finance theories, a negative association between information uncertainty and PEAD is troubling because it is not consistent with the notion that more reliable information improves market efficiency. In fact, previous empirical studies that use proxies for information uncertainty other than analyst forecast dispersion find a positive association between information uncertainty and PEAD. This study argues that the negative association between analyst forecast dispersion and PEAD can be explained by "herding" behavior immediately after earnings announcements. I introduce an analyst-based proxy for information uncertainty that mitigates the effects of herding on forecast dispersion. I find that, after controlling for the effect of herding, there is a positive association between information uncertainty and PEAD even when analyst forecasts are used to measure information uncertainty.

Download or read book Evolution of Market Uncertainty Around Earnings Announcements written by Dušan Isakov and published by . This book was released on 2013 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates theoretically and empirically the dynamics of the implied volatility (or implied standard deviation - ISD) around earnings announcements dates. The volatility implied by option prices can be interpreted as the level of volatility expected by the market over the remaining life of the option. We propose a theoretical framework for the evolution of the ISD that takes into account two well-known features of the instantaneous volatility: volatility clustering and the leverage effect. In this context, the ISD should decrease after an earnings announcement but the post-announcement ISD path depends on the content of the earnings announcement: good news or bad news. An empirical investigation is conducted on the Swiss market over the period 1989-1998.

Download or read book Risk Uncertainty and Profit written by Frank H. Knight and published by Cosimo, Inc.. This book was released on 2006-11-01 with total page 401 pages. Available in PDF, EPUB and Kindle. Book excerpt: A timeless classic of economic theory that remains fascinating and pertinent today, this is Frank Knight's famous explanation of why perfect competition cannot eliminate profits, the important differences between "risk" and "uncertainty," and the vital role of the entrepreneur in profitmaking. Based on Knight's PhD dissertation, this 1921 work, balancing theory with fact to come to stunning insights, is a distinct pleasure to read. FRANK H. KNIGHT (1885-1972) is considered by some the greatest American scholar of economics of the 20th century. An economics professor at the University of Chicago from 1927 until 1955, he was one of the founders of the Chicago school of economics, which influenced Milton Friedman and George Stigler.

Download or read book Earning Surprise and Implied Volatility written by Cai Zhu and published by . This book was released on 2015 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: Simple Bayesian learning models, such as those proposed by Lewellen and Shanken (2002) and Pastor and Veronesi (2003, 2006), suggest that new (additional) information reduces posterior variance of investor expectation for the unobservable. Consistent with such common wisdom, Dubinsky and Johannes (2006) and Barth and So (2013) show that implied volatility is high before earnings announcement and then decreases, after the uncertainty resolves. However, Veronesi (1999) illustrates that suppose realized signal deviating sufficiently from expected values, investors may revise their beliefs significantly and uncertainty towards future will increase. Motivated by Veronesi's model, we ask the research question: could there be a positive relation between earning surprise magnitude and future volatility? In the paper, we treat earning surprise as a measure of deviation between realized and expected signals, and study its long-term effect on equity implied volatility. Our results suggest that, larger earning surprise magnitude, no matter the news itself is good or bad, will lead to increasing implied volatility in following months, after controlling firm characteristics, heterogeneous belief proxy and other variables related to asset liquidity and informed trading. Moreover, we also find the same pattern for implied volatility change one day after earnings announcement.

Download or read book Stochastic Precision and Market Reactions to Earnings Announcements written by K. R. Subramanyam and published by . This book was released on 1993 with total page 314 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Inflation Expectations written by Peter J. N. Sinclair and published by Routledge. This book was released on 2009-12-16 with total page 402 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.

Download or read book The Handbook of Equity Market Anomalies written by Leonard Zacks and published by John Wiley & Sons. This book was released on 2011-08-24 with total page 352 pages. Available in PDF, EPUB and Kindle. Book excerpt: Investment pioneer Len Zacks presents the latest academic research on how to beat the market using equity anomalies The Handbook of Equity Market Anomalies organizes and summarizes research carried out by hundreds of finance and accounting professors over the last twenty years to identify and measure equity market inefficiencies and provides self-directed individual investors with a framework for incorporating the results of this research into their own investment processes. Edited by Len Zacks, CEO of Zacks Investment Research, and written by leading professors who have performed groundbreaking research on specific anomalies, this book succinctly summarizes the most important anomalies that savvy investors have used for decades to beat the market. Some of the anomalies addressed include the accrual anomaly, net stock anomalies, fundamental anomalies, estimate revisions, changes in and levels of broker recommendations, earnings-per-share surprises, insider trading, price momentum and technical analysis, value and size anomalies, and several seasonal anomalies. This reliable resource also provides insights on how to best use the various anomalies in both market neutral and in long investor portfolios. A treasure trove of investment research and wisdom, the book will save you literally thousands of hours by distilling the essence of twenty years of academic research into eleven clear chapters and providing the framework and conviction to develop market-beating strategies. Strips the academic jargon from the research and highlights the actual returns generated by the anomalies, and documented in the academic literature Provides a theoretical framework within which to understand the concepts of risk adjusted returns and market inefficiencies Anomalies are selected by Len Zacks, a pioneer in the field of investing As the founder of Zacks Investment Research, Len Zacks pioneered the concept of the earnings-per-share surprise in 1982 and developed the Zacks Rank, one of the first anomaly-based stock selection tools. Today, his firm manages U.S. equities for individual and institutional investors and provides investment software and investment data to all types of investors. Now, with his new book, he shows you what it takes to build a quant process to outperform an index based on academically documented market inefficiencies and anomalies.

Download or read book Event Specific Uncertainty and Its Expected Resolution written by Michael Iselin and published by . This book was released on 2019 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: Standard models of Bayesian updating predict a stronger investor reaction to new information when those investors are more uncertain about the firm. However, prior empirical literature has struggled to find widespread evidence in support of this prediction. This paper tests two explanations for this lack of empirical support. The first explanation is that extant measures of uncertainty tend to also capture noise in the reporting system, which has a negative relation with investors' response to new information. The second explanation is that when investors face high levels of overall uncertainty, earnings announcements do little to resolve that uncertainty. We provide evidence consistent with the latter explanation. We develop two measures of “event-specific uncertainty” - the amount of uncertainty expected to be resolved at an upcoming event - and show that this uncertainty construct is positively related to both earnings response coefficients and the informativeness of earnings announcements as a whole.

Download or read book Information Choice in Macroeconomics and Finance written by Laura L. Veldkamp and published by Princeton University Press. This book was released on 2011-08-22 with total page 181 pages. Available in PDF, EPUB and Kindle. Book excerpt: An authoritative graduate textbook on information choice, an exciting frontier of research in economics and finance Most theories in economics and finance predict what people will do, given what they know about the world around them. But what do people know about their environments? The study of information choice seeks to answer this question, explaining why economic players know what they know—and how the information they have affects collective outcomes. Instead of assuming what people do or don't know, information choice asks what people would choose to know. Then it predicts what, given that information, they would choose to do. In this textbook, Laura Veldkamp introduces graduate students in economics and finance to this important new research. The book illustrates how information choice is used to answer questions in monetary economics, portfolio choice theory, business cycle theory, international finance, asset pricing, and other areas. It shows how to build and test applied theory models with information frictions. And it covers recent work on topics such as rational inattention, information markets, and strategic games with heterogeneous information. Illustrates how information choice is used to answer questions in monetary economics, portfolio choice theory, business cycle theory, international finance, asset pricing, and other areas Teaches how to build and test applied theory models with information frictions Covers recent research on topics such as rational inattention, information markets, and strategic games with heterogeneous information

Download or read book Loss Aversion Discount on Earnings News written by Shai Levi and published by . This book was released on 2016 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study tests and finds that stock prices around earnings announcements reflect investor aversion to negative news. We find that when forecasts are negatively skewed, indicating considerable downside risk, earnings announcement returns are eventually more positive. Announcement returns are also positive after controlling for the effect of negative forecast skewness on earnings expectations and earnings surprise. Our results suggest the increase in the likelihood of large negative earnings news causes investors not only to lower their earnings expectations, but also to impose an additional price discount. When earnings are announced and uncertainty is resolved, the discount is removed and announcement returns are positive. By contrast, positive skewness in earnings forecasts does not affect announcement returns. Taken together, the evidence suggests investors assign higher discounts to negative uncertainty than to positive uncertainty. The results imply that to lower cost of equity, firms should be concerned more with resolving negative than positive uncertainty.

Download or read book Handbook Of Financial Econometrics Mathematics Statistics And Machine Learning In 4 Volumes written by Cheng Few Lee and published by World Scientific. This book was released on 2020-07-30 with total page 5053 pages. Available in PDF, EPUB and Kindle. Book excerpt: This four-volume handbook covers important concepts and tools used in the fields of financial econometrics, mathematics, statistics, and machine learning. Econometric methods have been applied in asset pricing, corporate finance, international finance, options and futures, risk management, and in stress testing for financial institutions. This handbook discusses a variety of econometric methods, including single equation multiple regression, simultaneous equation regression, and panel data analysis, among others. It also covers statistical distributions, such as the binomial and log normal distributions, in light of their applications to portfolio theory and asset management in addition to their use in research regarding options and futures contracts.In both theory and methodology, we need to rely upon mathematics, which includes linear algebra, geometry, differential equations, Stochastic differential equation (Ito calculus), optimization, constrained optimization, and others. These forms of mathematics have been used to derive capital market line, security market line (capital asset pricing model), option pricing model, portfolio analysis, and others.In recent times, an increased importance has been given to computer technology in financial research. Different computer languages and programming techniques are important tools for empirical research in finance. Hence, simulation, machine learning, big data, and financial payments are explored in this handbook.Led by Distinguished Professor Cheng Few Lee from Rutgers University, this multi-volume work integrates theoretical, methodological, and practical issues based on his years of academic and industry experience.

Download or read book Inefficient Markets written by Andrei Shleifer and published by OUP Oxford. This book was released on 2000-03-09 with total page 295 pages. Available in PDF, EPUB and Kindle. Book excerpt: The efficient markets hypothesis has been the central proposition in finance for nearly thirty years. It states that securities prices in financial markets must equal fundamental values, either because all investors are rational or because arbitrage eliminates pricing anomalies. This book describes an alternative approach to the study of financial markets: behavioral finance. This approach starts with an observation that the assumptions of investor rationality and perfect arbitrage are overwhelmingly contradicted by both psychological and institutional evidence. In actual financial markets, less than fully rational investors trade against arbitrageurs whose resources are limited by risk aversion, short horizons, and agency problems. The book presents and empirically evaluates models of such inefficient markets. Behavioral finance models both explain the available financial data better than does the efficient markets hypothesis and generate new empirical predictions. These models can account for such anomalies as the superior performance of value stocks, the closed end fund puzzle, the high returns on stocks included in market indices, the persistence of stock price bubbles, and even the collapse of several well-known hedge funds in 1998. By summarizing and expanding the research in behavioral finance, the book builds a new theoretical and empirical foundation for the economic analysis of real-world markets.

Download or read book Management Earnings Forecasts written by Hwa Deuk Yi and published by . This book was released on 1994 with total page 236 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book BID ASKS AROUND EARNINGS ANNOUNCEMENTS EVIDENCE FROM THE NASDAQ NATIONAL MARKET SYSTEM written by DOUGLAS J. SKINNER and published by . This book was released on 1993 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: