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Earnings Volatility
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Book Synopsis Exploiting Earnings Volatility by : Brian Johnson
Download or read book Exploiting Earnings Volatility written by Brian Johnson and published by . This book was released on 2015-04-08 with total page 256 pages. Available in PDF, EPUB and Kindle. Book excerpt: Exploiting Earnings Volatility introduces an innovative new framework for evaluating, optimizing, and trading option strategies to profit from earnings-related pricing anomalies. Leveraging his extensive background in option-pricing and decades of experience in investment management and trading, Brian Johnson developed this inventive approach specifically to design and manage option earnings strategies. In an Active Trader article titled "Modeling Implied Volatility," Mr. Johnson introduced a formula for aggregating discrete volatility measures into a single metric that can be used with conventional option pricing formulas to accurately model implied volatility before and after earnings announcements. The practical application of this formula has profound implications for option trading and strategy development. Exploiting Earnings Volatility is written in a clear, understandable fashion and explains how to use this novel approach to 1) solve for the expected level of earnings volatility implicitly priced in an option matrix, 2) calculate historical levels of realized and implied earnings volatility, 3) develop strategies to exploit divergences between the two, and 4) calculate expected future levels of implied volatility before and after earnings announcements. Furthermore, Exploiting Earnings Volatility also includes two Excel spreadsheets. The Basic spreadsheet employs minimal input data to estimate current and historical earnings volatility and utilizes those estimates to forecast future levels of implied volatility around earnings announcements. The Integrated spreadsheet includes a comprehensive volatility model that simultaneously integrates and quantifies every component of real-world implied volatility, including earnings volatility. This powerful tool allows the user to identify the precise level of over or undervaluation of every option in the matrix and to accurately forecast future option prices and option strategy profits and losses before and after earnings announcements. The Integrated spreadsheet even includes an optimization tool designed to identify the option strategy with the highest level of return per unit of risk. Written specifically for investors who have familiarity with options, this practical guide begins with a detailed review of volatility and an explanation of the aggregate implied volatility formula. A separate chapter provides a conceptual and mathematical explanation of "True Greeks," accurate measures of risk and return sensitivity that reflect the real-world behavior of options. New option Greeks that are specific to earnings announcements are also introduced. Four chapters explain how to use the Basic and Integrated spreadsheets and two chapters document trade examples that use actual market data and analytical results from both spreadsheets to design a unique option strategy to exploit earnings-related pricing and volatility anomalies. The final chapter examines practical considerations and prospective applications of these innovative new tools. This book introduces a new analytical framework that may sound complicated at first, but is really quite intuitive. The formulas presented in the book are limited to basic high-school algebra. Mathematical relationships are also explained intuitively and depicted graphically. Most important, you will not need to perform any of these calculations manually. Exploiting Earnings Volatility includes a link to Excel spreadsheets that perform all of the calculations described in the book. The unique price and volatility behavior of options before and after discrete earnings announcements is an enigma to most option traders, even to many professionals. The aggregate volatility formula is relatively simple, but it has profound implications. When integrated with a real-world volatility model, it offers unique insights into earnings volatility, price behavior, option strategy construction, and prospective value-added opportunities.
Book Synopsis Earnings Volatility and Earnings Predictability by : Ilia D. Dichev
Download or read book Earnings Volatility and Earnings Predictability written by Ilia D. Dichev and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Survey evidence indicates widely held managerial beliefs that earnings volatility is negatively related to earnings predictability. In addition, existing research suggests that earnings volatility is determined by economic and accounting factors, and both of these factors reduce earnings predictability. We find that the consideration of earnings volatility brings substantial improvements in the prediction of both short and long-term earnings. Conditioning on volatility information also allows one to identify systematic errors in analyst forecasts, which implies that analysts do not fully understand the implications of earnings volatility for earnings predictability.
Book Synopsis Earnings Volatility and Its Consequences for Households by :
Download or read book Earnings Volatility and Its Consequences for Households written by and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Earnings Volatility and the Value of Earnings Releases for Markets by : Zane L. Swanson
Download or read book Earnings Volatility and the Value of Earnings Releases for Markets written by Zane L. Swanson and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior research has conflicting findings concerning earnings volatility's effect on earnings releases to the stock market. In this paper, quot;volatilityquot; refers to the variability of accounting earnings information. For purposes of analysis, an option pricing model (OPM) framework is developed which shows that earnings directly associate with stock market price. This OPM model's characteristics indicate that higher (lower) accounting return volatilities will associate with lower (higher) market response coefficients to accounting earnings information. Empirical findings provide evidence that is consistent with this proposition. Recent earnings data (i.e., the previous four quarters) is sufficient to demonstrate a volatility effect on the earnings-return relation.
Book Synopsis Income Volatility and Food Assistance in the United States by : Dean Jolliffe
Download or read book Income Volatility and Food Assistance in the United States written by Dean Jolliffe and published by W.E. Upjohn Institute. This book was released on 2008 with total page 319 pages. Available in PDF, EPUB and Kindle. Book excerpt: The papers in this volume provide much needed focus and in depth coverage of the effect of income-volatility on the participation and design of food-assistance programs such as the Food Stamp Program and the National School Lunch Program.
Book Synopsis Option Strategies for Earnings Announcements by : Ping Zhou
Download or read book Option Strategies for Earnings Announcements written by Ping Zhou and published by FT Press. This book was released on 2012-10-15 with total page 258 pages. Available in PDF, EPUB and Kindle. Book excerpt: By trading on corporate earnings, investors can reliably profit in both up and down markets, while avoiding market risk for nearly the entire quarter. In this book, two leading traders and portfolio managers present specific, actionable techniques anyone can use to capture these sizable profits. Ping Zhou and John Shon have performed an unprecedented empirical analysis of thousands of stocks, reviewing tens of millions of data points associated with option prices, earnings announcement returns, and fundamentals. Their massive analysis has identified consistent opportunities associated with focusing on the magnitude of the market’s reaction to earnings, not its direction. Option Trading Set-Ups for Corporate Earnings News offers concrete guidance for improving the likelihood of making correct forecasts, and managing the risks of incorrect forecasts. It introduces several ways to exploit option trading opportunities around earnings news, discuss crucial issues that most retail investors haven’t considered, and explore aspects of earnings-related option trading that have never been empirically examined and documented before. For example, they identify hidden patterns and potential opportunities based on valuation, industry, volatility, analyst forecasts, seasonality, and trades that immediately follow earnings announcements. Simply put, trading on earnings reports offers immense profit opportunities, if you know how. This book provides incontrovertible facts and detailed strategies, not just theories and anecdotes!
Book Synopsis The Capital Market Consequences of Earnings Volatility by : Robert Resutek
Download or read book The Capital Market Consequences of Earnings Volatility written by Robert Resutek and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Errors in Self-reported Earnings: the Role of Previous Earnings Volatility by :
Download or read book Errors in Self-reported Earnings: the Role of Previous Earnings Volatility written by and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Keene on the Market by : Andrew Keene
Download or read book Keene on the Market written by Andrew Keene and published by John Wiley & Sons. This book was released on 2013-07-29 with total page 260 pages. Available in PDF, EPUB and Kindle. Book excerpt: A leading expert unveils his unique methodology for options trading Options provide a high leverage approach to trading that can significantly limit the overall risk of a trade or provide additional income. Yet, many people fail to capitalize on this potentially lucrative opportunity because they mistakenly believe that options are risky. Now options expert Andrew Keene helps aspiring investors to enter this sector by explaining the principles of the options market and showing readers how to utilize calls and puts successfully. Leading options expert Andrew Keene demystifies the basics of options trading Debunks the myth that call purchases are synonymous with being bullish and that put purchases are bearish Lays out in detail two distinct proprietary trading plans readers can follow Explains how to trade using market maker techniques and tricks from the trading floor to help with his probabilities in options trading Andrew Keene is best known for reading unusual options activity and seeing what others don't. Now he shares what he knows in a book that opens the opportunities of options trading to any investor.
Book Synopsis Reconciling Trends in U.S. Male Earnings Volatility by : Robert A. Moffitt
Download or read book Reconciling Trends in U.S. Male Earnings Volatility written by Robert A. Moffitt and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: There is a large literature on earnings and income volatility in labor economics, household finance, and macroeconomics. One strand of that literature has studied whether individual earnings volatility has risen or fallen in the U.S. over the last several decades. There are strong disagreements in the empirical literature on this important question, with some studies showing upward trends, some downward trends, and some flat trends. Some studies have suggested that the differences are the result of using flawed survey data instead of more accurate administrative data. This paper provides an overview of a project attempting to reconcile these findings with four different data sets and six different data series--three survey and three administrative data series, including two which match survey respondent data to their administrative data. Using common specifications, measures of volatility, and other treatments of the data, the papers show almost uniformly a lack of any significant long-term trend in male earnings volatility over the last 30 years. Moreover, the survey and the administrative data almost entirely agree on that long-term stability when the comparison is done properly. Several possible explanations for the differing finds in past work are suggested by the papers. The stability of earnings volatility raises many questions for future research on trends in the U.S. labor market.
Book Synopsis Earnings Volatility, Ambiguity, and Crisis-Period Stock Returns by : Anwer S. Ahmed
Download or read book Earnings Volatility, Ambiguity, and Crisis-Period Stock Returns written by Anwer S. Ahmed and published by . This book was released on 2019 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial crises are typically marked by substantial increases in ambiguity where prices appear to decouple from fundamentals. Consistent with ambiguity-based asset pricing theories, we find that ambiguity concerns are more severe for firms with higher pre-crisis earnings volatility, causing investors to demand a higher ambiguity premium for such firms. While there is no relation between earnings volatility and stock returns under normal conditions, there is a significant negative relation between crisis-period stock returns and prior earnings volatility. In other words, during economic turmoil, investors punish stocks whose past earnings volatility was higher despite that they do not perceive these stocks to be riskier under stable economic conditions. Our findings indicate that a firm's past earnings volatility predicts its stock price performance during crisis periods. We also find that this relation is stronger in firms with low institutional ownership and low analyst-following, consistent with ambiguity concerns being more important for firms with a greater proportion of unsophisticated investors. Our results are robust to controlling for firm-level characteristics as well as industry-fixed effects. Our evidence suggests that earnings stability helps mitigate ambiguity-concerns during a financial crisis.
Book Synopsis Earnings Volatility by : Christopher Michael Handy
Download or read book Earnings Volatility written by Christopher Michael Handy and published by . This book was released on 2013 with total page 137 pages. Available in PDF, EPUB and Kindle. Book excerpt: Earnings volatility-variability over time in a worker's earnings-is interesting for its potential welfare consequences and as a labor market outcome. In the presence of liquidity constraints, households may not be able to smooth consumption when faced with volatile earnings. And rising earnings volatility may indicate that workers are changing jobs more often or that implicit contracts governing compensation within jobs are smoothing pay less, to name two possibilities. This dissertation shows that earnings volatility has increased in the U.S., and assesses, for a specific concept and measure of volatility, the reasons for the increase. After an introduction, Chapter 2 introduces my preferred volatility measure, the volatility of residual earnings after estimating life cycle earnings profiles. Previous literature covers an array of concepts and measures of volatility. I outline differences among these approaches and argue that the primary motivation for studying volatility-potential welfare losses-has implications for the specification of the life cycle profiles and measures of earnings volatility. Chapter 3 describes the data I use, a sample of male heads of household from the PSID. In Chapter 4, I show that earnings volatility has increased in the U.S., and that about 70 percent of the increase is explained by volatility of wages rather than hours worked. I describe how earnings volatility differs across groups, and show that it has increased among almost all groups. Finally, I consider whether these findings depend on some measurement choices. All measures show increasing earnings volatility in the U.S., but the amount of the increase and comparisons of volatility across groups are often sensitive to methodological choices. Chapter 5 addresses why earnings volatility has increased in the U.S.I develop a decomposition approach to attribute changes in economy-wide volatility to various factors. I create a demand shock index that measures workers' predicted exposure to labor demand shocks, using national changes in the occupation-industry distribution of hours worked. My major finding is that larger or more frequent labor demand shocks explain about half of the increase in economy-wide earnings volatility between 1975 and 2005.
Book Synopsis The Evolution of Household Income Volatility by : Karen E. Dynan
Download or read book The Evolution of Household Income Volatility written by Karen E. Dynan and published by . This book was released on 2007 with total page 86 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Earnings Volatility Across Groups and Time by : John Sabelhaus
Download or read book Earnings Volatility Across Groups and Time written by John Sabelhaus and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inferences about earnings volatility across groups and time depend on underlying models of earnings dynamics, data sources, earnings concepts, and sampling strategies. In this paper we evaluate a model of earnings dynamics in which the permanence of shocks varies by age and education. This specification is consistent with observed earnings changes in administrative panel data, and also with the variance of earnings levels in multiple cross-section (synthetic panel) data. However, expanding the earnings concept to include self-employment and changing sampling strategy to include observations with minimal labor force attachment has first-order effects, and may help explain why some studies conclude that earnings volatility is rising.
Book Synopsis Trends in Men's Earnings Volatility by : Donggyun Shin
Download or read book Trends in Men's Earnings Volatility written by Donggyun Shin and published by . This book was released on 2008 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Using Panel Study of Income Dynamics data for 1969 through 2004, we examine movements in men's earnings volatility. Like many previous studies, we find that earnings volatility is substantially countercyclical. As for secular trends, we find that men's earnings volatility increased during the 1970s, but did not show a clear trend afterwards until a new upward trend appeared in the last few years. These patterns are broadly consistent with the findings of recent studies based on other data sets"--National Bureau of Economic Research web site
Book Synopsis The Trade-off Between Risk Management and Earnings Volatility by : Linda Kolbasovsky
Download or read book The Trade-off Between Risk Management and Earnings Volatility written by Linda Kolbasovsky and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Predictive Qualities of Earnings Volatility and Earnings Uncertainty by : Dain C. Donelson
Download or read book The Predictive Qualities of Earnings Volatility and Earnings Uncertainty written by Dain C. Donelson and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the differential predictive power of past earnings volatility for analyst forecast errors and future returns. Past earnings volatility jointly captures two correlated, but distinct, earnings properties: time-series earnings variation and uncertainty in future earnings. To distinguish between these two earnings properties, we develop a forward-looking measure of earnings uncertainty that has a minimal mechanical link to variation in prior-period earnings realizations and does not rely on analyst forecasts. Our results suggest that future earnings uncertainty, and not time variation in earnings, is associated with overly optimistic future earnings expectations of equity analysts and investors. We provide the first empirical evidence on the relevance of future earnings uncertainty to analysts and investors over one-year horizons. In addition, we provide empirical evidence showing that forecast dispersion is a poor measure of earnings uncertainty.
