Non-Diversifiable Volatility Risk and Risk Premiums at Earnings Announcements
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 ris...
| Main Authors: | , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
| Published: |
American Accounting Association
2017
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| Online Access: | http://hdl.handle.net/1721.1/111118 https://orcid.org/0000-0002-9345-2123 |
| _version_ | 1826188018988351488 |
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| author | Barth, Mary E. So, Eric |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Barth, Mary E. So, Eric |
| author_sort | Barth, Mary E. |
| collection | MIT |
| description | 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. |
| first_indexed | 2024-09-23T07:53:21Z |
| format | Article |
| id | mit-1721.1/111118 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T07:53:21Z |
| publishDate | 2017 |
| publisher | American Accounting Association |
| record_format | dspace |
| spelling | mit-1721.1/1111182024-07-19T19:33:51Z Non-Diversifiable Volatility Risk and Risk Premiums at Earnings Announcements Barth, Mary E. So, Eric Sloan School of Management So, Eric 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. 2017-09-05T15:17:32Z 2017-09-05T15:17:32Z 2014-03 2013-01 Article http://purl.org/eprint/type/JournalArticle 0001-4826 1558-7967 http://hdl.handle.net/1721.1/111118 Barth, Mary E., and So, Eric C. “Non-Diversifiable Volatility Risk and Risk Premiums at Earnings Announcements.” The Accounting Review 89, 5 (September 2014): 1579–1607 https://orcid.org/0000-0002-9345-2123 en_US http://dx.doi.org/10.2308/accr-50758 The Accounting Review Creative Commons Attribution-Noncommercial-Share Alike http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf American Accounting Association Prof. So via Shikha Sharma |
| spellingShingle | Barth, Mary E. So, Eric Non-Diversifiable Volatility Risk and Risk Premiums at Earnings Announcements |
| title | Non-Diversifiable Volatility Risk and Risk Premiums at Earnings Announcements |
| title_full | Non-Diversifiable Volatility Risk and Risk Premiums at Earnings Announcements |
| title_fullStr | Non-Diversifiable Volatility Risk and Risk Premiums at Earnings Announcements |
| title_full_unstemmed | Non-Diversifiable Volatility Risk and Risk Premiums at Earnings Announcements |
| title_short | Non-Diversifiable Volatility Risk and Risk Premiums at Earnings Announcements |
| title_sort | non diversifiable volatility risk and risk premiums at earnings announcements |
| url | http://hdl.handle.net/1721.1/111118 https://orcid.org/0000-0002-9345-2123 |
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