Abstract
We use the Indian stock options market to study the evolution of uncertainty and asymmetric uncertainty around earnings announcements (EAs). We find that uncertainty (implied volatility) and asymmetric uncertainty (options skew) increase monotonically before the EA day and decrease after EA. Options volume (relative to spot and to futures) also exhibits similar behavior, suggesting that informed investors prefer options markets to spot and futures markets. Both options skew and put-to-call volume ratio can predict the sign of the EA surprise one day before EA, indicating that price discovery and information assimilation happen in the options market.
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
Recommended Citation
Saurav, Sumit; Agarwalla, Sobhesh Kumar; and Varma, Jayanth R.
(2024)
"Asymmetric Uncertainty Around Earnings Announcements: Evidence from Options Markets,"
American Business Review: Vol. 27:
No.
2, Article 4.
DOI: 10.37625/abr.27.2.459-487
Available at:
https://digitalcommons.newhaven.edu/americanbusinessreview/vol27/iss2/4
DOI
10.37625/abr.27.2.459-487
