Volatility Forecasting Using Financial Statement Information

Sridharan, Suhas A.

doi:10.2139/ssrn.1984324

Cited by 8 publications

(18 citation statements)

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“…To explore the overlap between her signals, we calculate the natural log of the standard deviation of earnings yields and the natural log of the standard deviation of changes in market-to-book premiums over the window we use to calculate our long window signals. 13 We continue to observe that our fundamental signals have a positive and significant association with future straddle returns after controlling for the variables in Sridharan (2015).…”

Section: Additional Analyses and Sensitivity Checksmentioning

confidence: 68%

“…To complement our analysis using the Black–Scholes model implied volatility provided by Optionmetrics; we also consider an alternative implied volatility measure, model-free implied volatility. Following the technique described in Sridharan (2015), we estimate implied volatility based on the prices of put and call options from the Optionmetrics volatility surface data set. 12 We repeat our main analysis using this alternative volatility measure.…”

Section: Additional Analyses and Sensitivity Checksmentioning

confidence: 99%

Section: Additional Analyses and Sensitivity Checksmentioning

confidence: 99%

“…In another contemporaneous article, Sridharan (2015) examines the association between fundamental signals and straddle returns. Sridharan (2015) uses an accounting-based asset pricing model (Penman, Reggiani, Richardson, & Tuna, 2015) to link the volatility of returns to the volatility of earnings yields and the volatility of changes in the market-to-book premium. To explore the overlap between her signals, we calculate the natural log of the standard deviation of earnings yields and the natural log of the standard deviation of changes in market-to-book premiums over the window we use to calculate our long window signals.…”

Section: Additional Analyses and Sensitivity Checksmentioning

confidence: 99%

“…Our research contributes to existing literature in multiple ways. First, our study contributes to a growing body of accounting research examining option returns (e.g., Barth & So, 2014; Rogers, Van Buskirk, & Skinner, 2009; Sridharan, 2015). These previous studies use implied volatilities to measure the degree to which investors reassess their beliefs about the firm after disclosure (Rogers et al, 2009) or to capture the extent to which investors anticipate the release of news at earnings announcement that provide systematic news (Barth & So, 2014).…”

Section: Introductionmentioning

confidence: 97%

See 4 more Smart Citations

Fundamental Analysis and Option Returns

Goodman

Neamtiu

Zhang

2017

Journal of Accounting, Auditing & Finance

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This article investigates whether fundamental volatility information is appropriately priced in the options market. We find that fundamental signals exhibit incremental predictive power with respect to future option returns above and beyond what is captured by implied and historical stock volatility, suggesting that the options market does not fully incorporate fundamental information into option prices. Transaction costs substantially reduce the overall profitability of hedge strategies that exploit only the fundamental volatility information in these accounting signals; however, fundamental signals provide a useful complement for strategies based on historical volatility.

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Section: Additional Analyses and Sensitivity Checksmentioning

confidence: 68%

Section: Additional Analyses and Sensitivity Checksmentioning

confidence: 99%

Section: Additional Analyses and Sensitivity Checksmentioning

confidence: 99%

Section: Additional Analyses and Sensitivity Checksmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 97%

See 3 more Smart Citations

Fundamental Analysis and Option Returns

Goodman

Neamtiu

Zhang

2017

Journal of Accounting, Auditing & Finance

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The value relevance of Other Comprehensive Income: Extensive evidence from Europe

2020

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This study investigates the value relevance of the Other Comprehensive Income (OCI). Limited literature has focused on the relevance on equity price and return. We go further by including the usefulness of OCI volatility on equity total risk which contributes to the inconclusive debate on how markets perceive different pieces of accounting information. After the adoption of the IAS (1), companies must disclose information about OCI, which shifts the focus from net income to comprehensive income. It shows the return that a company has made on its economic resources, determining a potential support for improving investors' decision‐making process. Contrarily, some studies demonstrated that comprehensive income is not a true performance indicator because it includes nonrecurring items (i.e., unrealized gains and losses related to the change in the fair market value of available‐for‐sales securities). To test the relevance aspects of the OCI, we focus on the European context, and in particular on the analysis of the super sector leaders in Europe, the companies of the STOXX 50 index over the period from 2010 to 2016. We find a weak negative association between OCI and equity price, and it is a firm specific effect. Similar weak mixed relationships with equity return is found and in particular it is a year‐specific effect. In addition, our findings reveal that the volatility of OCI is positively related to equity total risk. Compared to U.S and other international contexts, the findings provide novel insights at the European Union level about the inconsistent valuation usefulness of OCI.

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Management forecasts of volatility

Ellahie

Peng

2021

Rev Account Stud

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We examine the predictive information content of the management forecasts of stock return volatility (i.e., expected volatility) that are disclosed in annual reports. We find that expected volatility predicts near-term and longer-term stock return volatility and earnings volatility incremental to implied volatility, historical volatility, firm characteristics, and alternative measures of uncertainty. We also find that expected volatility reflects managers’ private information about their firms’ future investment activities, such as mergers and acquisitions and R&D intensity. Finally, we find that the predictive power of expected volatility shrinks when managers have stronger incentives to manage earnings. Overall, we provide novel evidence that management forecasts of volatility contain private information about future uncertainty that can help forecast volatility.

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Volatility Forecasting Using Financial Statement Information

Cited by 8 publications

References 0 publications

Fundamental Analysis and Option Returns

Fundamental Analysis and Option Returns

The value relevance of Other Comprehensive Income: Extensive evidence from Europe

Management forecasts of volatility

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