scholarly journals Non-Diversifiable Volatility Risk and Risk Premiums at Earnings Announcements

2012 ◽  
Author(s):  
Mary E. Barth ◽  
Eric C. So
Keyword(s):  
Earnings Announcements ◽  
Volatility Risk ◽  
Risk Premiums

scholarly journals Non-Diversifiable Volatility Risk and Risk Premiums at Earnings Announcements

2014 ◽  
Vol 89 (5) ◽  
pp. 1579-1607 ◽  
Author(s):  
Mary E. Barth ◽  
Eric C. So
Keyword(s):  
Risk Premium ◽  
Earnings Announcements ◽  
Return Volatility ◽  
Volatility Risk ◽  
Risk Premiums ◽  
Market Return ◽  
Predictable Variation ◽  
Jel Classifications

ABSTRACT This study seeks to determine whether earnings announcements pose non-diversifiable volatility risk that commands a risk premium. We find that investors anticipate some earnings announcements to convey news that increases market return volatility and pay a premium to hedge this non-diversifiable risk. In particular, we find evidence of risk premiums embedded in prices of firms' traded options that are significantly positively associated with the extent to which the firms' earnings announcements pose non-diversifiable volatility risk. In addition, we find that volatility risk premiums are concentrated among bellwether firms and result in predictable variation in option straddle returns around earnings announcements. Taken together, our findings show that some earnings announcements pose non-diversifiable volatility risk that commands a risk premium. JEL Classifications: M41; G12; G13; G14

Implied risk aversion and volatility risk premiums

2011 ◽  
Vol 22 (1) ◽  
pp. 59-70 ◽  
Author(s):  
Sun-Joong Yoon ◽  
Suk Joon Byun
Keyword(s):  
Risk Aversion ◽  
Volatility Risk ◽  
Risk Premiums

scholarly journals Stochastic Volatility in General Equilibrium

2011 ◽  
Vol 01 (04) ◽  
pp. 707-731 ◽  
Author(s):  
George Tauchen
Keyword(s):  
Stock Market ◽  
General Equilibrium ◽  
A Priori ◽  
Market Volatility ◽  
Elasticity Of Substitution ◽  
Stock Market Volatility ◽  
Volatility Risk ◽  
Risk Premiums ◽  
Volatility Asymmetry ◽  
Main Model

The connections between stock market volatility and returns are studied within the context of a general equilibrium framework. The framework rules out a priori any purely statistical relationship between volatility and returns by imposing uncorrelated innovations. The main model generates a two-factor structure for stock market volatility along with time-varying risk premiums on consumption and volatility risk. It also generates endogenously a dynamic leverage effect (volatility asymmetry), the sign of which depends upon the magnitudes of the risk aversion and the intertemporal elasticity of substitution parameters.

Volatility Risk Premiums Embedded in Individual Equity Options

2003 ◽  
Vol 11 (1) ◽  
pp. 45-54 ◽  
Author(s):  
Gurdip Bakshi ◽  
Nikunj Kapadia
Keyword(s):  
Equity Options ◽  
Volatility Risk ◽  
Risk Premiums

The Effect of Reporting Streaks on Ex Ante Uncertainty

2020 ◽  
Vol 66 (8) ◽  
pp. 3771-3787 ◽  
Author(s):  
Thaddeus Neururer ◽  
George Papadakis ◽  
Edward J. Riedl
Keyword(s):  
Stock Returns ◽  
Earnings Announcements ◽  
Earnings Announcement ◽  
Risk Premiums ◽  
Quarterly Earnings ◽  
Earnings Per Share ◽  
Ex Ante ◽  
Variance Risk ◽  
Analyst Earnings ◽  
Lower Uncertainty

This paper predicts and finds that investor uncertainty surrounding a key information release event—the earnings announcement—is decreasing in a firm’s reporting streak. We use two proxies related to investor ex ante uncertainty and corresponding pricing of such uncertainty: option-implied volatilities and variance risk premiums; both are measured with maturities surrounding the impending quarterly earnings announcement. Consistent with prior research, we measure reporting streak as the number of consecutive quarters the firm meets or beats the consensus analyst earnings-per-share forecast. Empirical results confirm expectations that the two uncertainty-related constructs are decreasing in the length of the reporting streak. These results, combined with further evidence documenting that lower uncertainty leads to lower stock returns surrounding the earnings announcements, suggest that longer reporting streaks reflect lower risk during earnings announcements. This paper was accepted by Shiva Rajgopal, accounting.

scholarly journals The impact of internationalisation on stock liquidity and volatility: Evidence from the Johannesburg Stock Exchange

2018 ◽  
Vol 11 (1) ◽  
Author(s):  
Kudakwashe J. Chipunza ◽  
Kerry McCullough
Keyword(s):  
Risk Premium ◽  
Firm Value ◽  
Trading Volume ◽  
Cost Of Capital ◽  
Stock Exchange ◽  
Volatility Risk ◽  
Stock Liquidity ◽  
Risk Premiums ◽  
Significant Difference ◽  
The Impact

Maximising firm value remains a key tenet of corporate managers. Firms with lower illiquidity and volatility attract lower risk premiums, and these are associated with a lower cost of capital and higher firm value. Internationalisation is one avenue purported to provide liquidity and volatility benefits – possibly lowering both liquidity and volatility risk premiums. This study investigated whether South African domiciled stocks experience a surge in liquidity and/or decline in volatility subsequent to internationalisation. The findings show that internationalisation resulted in a surge in liquidity, and this increase was persistent as suggested by the trading volume and Amihud illiquidity measures of stock liquidity; however, the turnover measure indicated that such liquidity gains were temporary. Similarly, volatility declines after internationalisation were temporary. There was inconclusive evidence to show that internationalised stocks had higher liquidity relative to purely domestic shares, and no statistically significant difference between the volatility of internationalised and purely domestic shareholders’ equity was noted. There is only weak evidence to support internationalisation as a route for lowering cost of capital via a reduction in the liquidity risk premium.

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