This paper examines the relation between firm-level implied volatility skew and the likelihood of extreme negative events, or crash risk. I show that volatility skew identifies which firms are likely to experience crashes, but only in short-window earnings announcement periods. The predictive...

We test the proposition in Johnstone (2016) that new information may lead to higher, rather than lower, uncertainty about firms' future payoffs. Based on the Bayesian rule, we hypothesize earnings news that is inconsistent with investors' prior belief will lead to higher market uncertainty....

Financial crises are typically marked by substantial increases in ambiguity where prices appear to decouple from fundamentals. Consistent with ambiguity-based asset pricing theories, we find that ambiguity concerns are more severe for firms with higher pre-crisis earnings volatility, causing...

The aim of this study is to analyze different forecasting approaches for the variance of future earnings, compare the respective forecast accuracy and test whether the forecasted information are relevant to equity or debt markets. The results, in line with former research, indicate that...

Ever since Harry Markowitz published his seminal paper on portfolio selection, investors have incorporated estimates of future volatilities and correlations into their asset allocation process. While portfolio construction methods continue to evolve, many investors continue to forecast...

The article presents a quantitative strategy in which comparison of short-term asset price movement with corresponding middle-term asset volatility is used for determination of the size of opening position when buy signal is obtained from trend following model. The strategy is named as...

Volatility forecasts play a central role among equity risk measures. Besides traditional statistical models, modern forecasting techniques, based on machine learning, can readily be employed when treating volatility as a univariate, daily time-series. However, econometric studies have shown that...

The primary aim of this study is to investigate the stock return volatility surrounding management earnings forecasts. Disclosure by managers of expected earnings are particularly important communications, and as such, it is important to understand the capital market implications surrounding...

We find that lower ex-ante earnings volatility leads to higher Post-Earnings Announcement Drift (PEAD). PEAD is a function of both the magnitude of an earnings surprise and its persistence. While prior research has largely investigated market reactions to the magnitude of the earnings surprise,...

Firm Profitability - Does it really matter for shareholder return or ROE (return on equity)? Does this question sound oxymoron and antithetic? Not really. On the contrary, evidence has surfaced that Returns on equity - based on the shareholders' equity accounted in the balance sheet - is not...