This study examines the effect of option volume relative to stock volume (O/S) on market response to earnings surprises. The market reaction per unit of earnings surprise is lower for firms that have high O/S prior to earnings announcement than for firms with low O/S prior to earnings...

This paper hypothesizes that if an earnings announcement fails to resolve uncertainty about the firm’s future outcomes, then management will take steps to further inform investors. The novelty of our approach consists of our empirical proxy for unresolved uncertainty, constructed using a...